The Liberal government’s proposed tax changes are meeting stiff opposition from small business owners and farm communities.
The changes, touted as “closing loopholes,” are being viewed by many as a debilitating to business.
“They really want to make it about wealthy doctors and lawyers and those types of people,” said Jeff Hall, vice president of the Drumheller and District Chamber of Commerce. “The way the draft legislation is presented, it is basically going to affect every incorporated business that is out there. They want the narrative to be about loopholes and the super wealthy and how they need to pay their fair share, but in reality, it’s going to impact everybody.”
He explains that one change will affect family businesses.
“In a family business typically whoever the shareholder of the company may be, they are probably going to have their spouse working in their business, or their kids working in their business. Typically those business owners when they are starting out or going along, are not making a whole bunch of money, but their business survives because their family is contributing and helping them along,” said Hall. “From the income sprinkling standpoint, they are no longer going to be able to pay a wage to those people. Everything would have to be deemed as to what Revenue Canada says is reasonable. How do you determine reasonability?”
He explains they term this Tax on Split Income.
“Anything they may deem as unreasonable will be taxed at the highest rate.”
Another component of the tax change discourages a company retaining funds.
“Typically a small business owner is not eligible for EI or you don’t get paid for holidays. Any funds that are retained in your company that are not used in Revenue Canada’s definition of “in the course of business” could be subject to an extremely offensive rate of tax,” said Hall.
The third component of the changes has to do with transitioning assets. This is especially concerning to family farms.
“It is actually cheaper for a farmer to sell his farm to an outside third party than it is to transition it down to the next generation because there is going to be higher implications to tax,” said Hall. “I don’t think that’s what the government wants, but that’s how the stuff is written.”
As vice president of the local Chamber of Commerce, he says chambers from across the country are organizing, as well as other organizations.
“Whether you are talking to the Canadian Beef producers or the Canadian Federation of Small Business, there is a list of hundreds of organizations that have written letters to the government saying why this is wrong,” he said.
He says it is important for those concerned to voice their position
“If there isn’t enough of a pushback from business owners and business organizations, we fully expect these things to be implemented at some point in time,” said Hall. “If there is enough pushback, maybe the government will come back and say … ‘how can we work a solution that isn’t going to damage every business or every transition that is out there.’”
