Many people have recently noticed that federal Finance Minister Bill Morneau announced he will be considering certain business tax changes with the goal of “improving fairness in the tax system by closing loopholes and addressing tax planning strategies.”
Yet, it’s not quite so straight-forward as he would have us believe. The measures are quite complicated, and may affect small business owners in a very negative way. While some of the principles I have no issue with, such as proving that adult children who are receiving pay are actually contributing to the business, there are other items I do have problems with. This includes the high taxation of investment income in the corporation. This will increase the effective tax rate so much that it can become useless to hold money in the company. And the complications involved in figuring this out are so high that many small businesses will not (or do not) have the resources to understand or calculate the requirements on this.
If you want to see more details on this, here are some newspaper articles that have recently run to give you some more insight:
- “A 93% tax rate? Private corporation tax could make it possible” (Financial Post)
- “Proposed tax changes would shake the small-business world” (Globe and Mail)
- “Proposed tax reforms don’t crack down on the wealthy; they threaten small business” (Ottawa Citizen)
What can we do about it as citizens and small business owners? Currently, the government is accepting feedback on this, until October 2, 2017. To give your feedback write your MP. A simple note stating what you feel, why, and what action you would like your MP to take is sufficient. Me, I’m asking them to scrap the whole thing, even though it will make tax laws more complicated, which gives me more work. I’d rather people have a fair deal. Thanks!
To contact your MP, you can search by postal code here.