There has been growing pushback to tax proposals from the federal Liberal government, as critics say the changes will have unfair consequences for small business owners.
In July, Bill Morneau, the Minister of Finance, announced the proposals which focus on three areas of tax policy — income sprinkling using private corporations, holding a passive investment portfolio inside a private corporation and converting a private corporation’s regular income into capital gains.
Since the announcement, the federal government has mandated a 75-day consultation period, seeking public input on the proposed changes, as the Liberals have singled they are open to tweaking the bill.
However, reaction to the changes has been swift across the country and within the Key City, as the Cranbrook Chamber of Commerce has been critical of the bill, while Taylor Adams Chartered Professional Accountants released a public letter warning about the negative impacts that the changes will have on small businesses.
In an interview with the Townsman, Mike Adams, the author of the letter, said the proposals are the biggest changes in tax policy in over 50 years.
“One of my biggest issues with this is there might be specific things that the government doesn’t like that they could try to target and fix,” said Adams, “but what they’ve done is, instead of focusing on that one thing, they’ve made these really wide swaths of change that are ending up affecting way more people than what I think the actual change should be focused on.
“That’s where a lot of people are being hit with these changes that I don’t think anything that they’re doing or have ever done goes against the spirit of how the tax system is supposed to work.”
Even though Adams was critical of the proposed changes, he offered three improvements to the Liberal plan. For conversion of income to capital gains, Adams would like to see a longer consultation period to help private corporations deal with estate planning and taxation on the death of a shareholder.
For income splitting, Adams proposes opening that policy up to all taxpayers, not just business owners. He also suggests that taxes should be calculated on the family unit, eliminating the need for ‘income sprinkling’.
While the government is eyeing changes to passive investment income, Adams says those proposals should be completely omitted, given that holding passive investments inside a corporation helps business owners save for retirement.
“Those are the three proposals that the government has come up with that they are trying to target,” Adams said. “When I wrote my letter, I just looked at each one of those with what I feel is wrong about the way they’re going about it and just tried to go into each specific one.”
The government is accepting submissions on the proposals until Oct. 2, 2017, which can be emailed to The Government is accepting submissions on these proposals until October 2, 2017. Comments may be emailed to email@example.com.