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Canadian Firms Oppose Govt's New Tax Changes

by Mike Godfrey, Tax-news.com, Washington

21 August 2017


The Canadian Government's planned crackdown on tax planning strategies that involve private corporations could result in significant tax increases that negatively affect entrepreneurs, according to the Society of Trust and Estate Practitioners (STEP) Canada.

STEP Canada is part of STEP Worldwide, an international organization for trust and estate professionals. On August 17, it held a symposium on the taxation of private corporations and stakeholders, and the day ended with a summary of the conclusions that will form the framework for a range of submissions to the Department of Finance on the proposals.

STEP Canada said that attendees "agreed that if legislated, this dramatic tax policy change could fuel uncertainty and bring unintended consequences including very significant tax increases that negatively affect entrepreneurs – ultimately harming the Canadian economy with a decrease in capital and taxpaying jobs."

Michael Cadesky, co-chair of the STEP Canada Public Policy Committee, said: "Our group of more than 70 interested, passionate, and concerned business leaders, economists, academics, and professionals formulated solid conclusions regarding the proposed legislation yesterday, including key examples that service to reinforce why the rules need to be rethought."

The Government wants to tackle so-called income sprinkling, whereby income is diverted from a high-income individual to family members with lower personal tax rates, or to family members who may not be taxable at all. It also wants to ensure that the tax treatment of passive investments retained in a corporation is fair, and to prevent the surplus income of a private corporation from being converted to a lower-taxed capital gain and stripped from the corporation.

Pamela Cross, National Deputy Chair of STEP Canada, commented: "What will be surprising to many Canadians is the far-reaching nature of these proposals. The Government has framed this issue as simply closing loopholes for the very wealthy and ensuring the tax system is 'fair.' In fact, these proposals will adversely impact many business owners and their families who consider themselves squarely in the middle-class and who do not have the financial safety net available to employees."

"Far from addressing loopholes, these proposals constitute a significant change in tax policy that has been in place for 40 years. Any significant change in tax policy should be made in a considered and thoughtful manner, which a full understanding of the impact of the hard-working Canadian entrepreneurs that drive our economy."

TAGS: compliance | tax | investment | business | tax compliance | interest | entrepreneurs | employees | professionals | legislation | tax planning | tax rates | Canada | tax breaks | tax reform | trade association | trade

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