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Canadian Businesses Concerned By Tax Reforms

by Mike Godfrey, Tax-News.com, Washington

25 September 2017


The Canadian Federation of Independent Business (CFIB) has published a survey it said shows that 94 percent of small business owners and 95 percent of tax practitioners are opposed to the Government's proposed reforms to tax planning strategies used by private corporations.

CFIB surveyed 8,553 business owners and 410 practitioners earlier this month to gather views on the federal Government's proposed measures.

The Government intends to prevent individuals from using private corporations in ways that allow them to reduce their personal taxes. It is consulting on proposals to crack down on "income sprinkling" among family members, the retention of passive investments in private corporations, and the conversion of the surplus income of private corporations to lower-taxed capital gains.

According to CFIB, 95 percent of the business owners surveyed agreed that the proposed changes will "harm middle-class small business owners and their families, rather than close a few loopholes for the wealthy." In addition, 92 percent said that they were concerned that the reforms will create fresh uncertainty for their business, while 88 percent said they feared it would become harder to grow their business and create jobs.

The survey also found that 57 percent of the business owners surveyed felt that the reforms were "very significant" for their company, while 30 percent agreed that they were "somewhat significant."

In particular, CFIB said that the Government's proposals would make it more difficult for small businesses, including family-run businesses, to share income with family members. More than 50 percent of those surveyed said that they share income with their spouses, and 65 percent said they hold some form of passive investment in their companies.

CFIB also said that 76 percent of small business owners and 82 percent of tax practitioners agreed that the federal Government is proposing a set of significant tax changes for small firms without fully understanding the impact they will have.

Dan Kelly, President of CFIB, commented: "The Government is trying to convince the public that these proposed changes are meant to support the middle class – that they are only targeting high-income business owners. The reality, however, is these are broad-brush proposals that are going to affect businesses at every income level across the country. Nine out of 10 business owners have told us that these tax changes are significant to their business."

Kelly added: "The implications of these changes for small businesses – and by extension to the national economy – are huge. These aren't loopholes for the wealthy, as the Government claims. These are legitimate ways for small business owners to grow their business, ensure the stability of the firm during uncertain times, or to save for the[ir] retirement. Without these measures, businesses will not be able to create as many jobs for Canadians."

TAGS: individuals | capital gains tax (CGT) | tax | investment | small business | business | tax avoidance | tax incentives | retirement | corporation tax | small and medium-sized enterprises (SME) | tax planning | tax rates | Canada | tax breaks | tax reform | trade association | trade | individual income tax

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