MEDICINE HAT, AB – For many local business owners, paying tax is a necessary part of being an entrepreneur.
However, proposed tax changes from the federal government in July have many across the business community worried about their future finances.
For Perry Deering, this summer’s proposed corporate tax changes from the federal government came as an unwelcome surprise.
President of the Medicine Hat and District Chamber of Commerce’s board of directors and owner of Deerview Meats, Deering said business people in all sectors will be impacted.
“No one is exempt, this is a big paint brush,” said Deering. “It's everything from a small retail [store], all the way to agriculture.”
The changes would eliminate three aspects of corporate taxation including:
- income sprinkling, which allows business owners to shift income to family members
- eliminating the ability for corporations to convert funds into capital gains
- reducing the use of passive investments, which allows business owners to invest money that is deemed extra for the company.
According to the Liberals, the moves would help eliminate corporate tax loopholes, which allow some businesses to be taxed at a lower rate.
In a press conference on September 5, Finance Minister Bill Morneau said these changes were proposed to keep the system equitable for Canadians coast-to-coast.
“This is about making sure that the next generation of Canadians and the generation after that, have a tax system that creates opportunities for them,” said Morneau. “And, not unfair advantages for a small sub-set.”
Ryan Dorton is a partner at Johnston Morrison Hunter, and said there’s a reason employees and business owners are taxed differently.
“If they do come through, things will be more equal,” said Dorton. “But the question is, is an employee taking on the same kind of risks as a small-business owner.”
According to Dorton, some of these risks include paying salaries, vacation time, and other costs of running a business.
Drew Jackiw is also a partner at Johnston Morrison Hunter, and added family-run operations will be impacted by the elimination of income sprinkling.
“Even if you're looking at a situation where a business earns $100,000 in a year and splits 50-50 with their spouse, that's still going to result in more tax if they're unable to split that income based on the progressive tax rate system that we have in Canada.”
The Chamber of Commerce has been vocal in speaking out against the changes, asking members to write to MP Glen Motz and voice their opinions.
Motz said the tax rules that are in place aren’t loopholes at all.
“They are laws which exist within the tax code,” said Motz. “If the Liberal government wants to change the tax code, then let's change the tax code. Let's call a commission, let's spend a number of years studying how we can change it.”
For Deering, he said this is a personal issue both as a business advocate and a business owner.
“This is your business, this is strongly your finances.”
Finance Canada is accepting written submissions on the topic until October 2, you can email [email protected] to reach out.
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