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Morneau Meeting With SMEs To Discuss 'Tax Fairness'

by Mike Godfrey, Tax-News.com, Washington

06 September 2017


Canadian Finance Minister Bill Morneau has launched what the Government calls a "national listening tour," to discuss his plans to crack down on tax planning strategies used by private corporations.

Morneau met with small business owners in Vancouver on September 5, and Small Business Minister Bardish Chagger will continue the consultations in the coming days.

Morneau said of the tour: "I know first-hand that running a business is hard work. It involves taking risks, suffering setbacks, and often a great deal of sacrifice. I am committed to ensuring that this hard work is rewarded, and that Canada's tax system continues to help businesses small and large to expand and create jobs. Meetings like the ones today are an important part of the dialogue as we consult on ways to ensure a competitive and fairer tax system for all Canadians."

The Government believes that an increasing number of Canadians are using private corporations in ways that allow them to reduce their personal taxes. It is currently consulting on proposals for tackling so-called income sprinkling, the retention of passive investments in private corporations, and the conversion of the surplus income of private corporations to lower-taxed capital gains.

Speaking after the meeting, Morneau told reporters that there has been a 300 percent increase in the incorporation of professionals in the past 15 years. He said: "We don't want to be in a situation where there are two classes of Canadians: one class that can incorporate, another class that can't; one class that as a result has lower tax rates, the other that has higher tax rates. That's not, in our estimation, a sustainable long-term future."

Last week, 35 business organizations wrote to Morneau to ask that he scrap what they described as "sweeping changes that will affect of sectors of Canada's business community."

On September 5, the Canadian Federation of Independent Business (CFIB) said it delivered 14,691 petition letters to MPs from business owners concerned about the measures.

CFIB President Dan Kelly said: "In my 23 years of working on behalf of small businesses, I have not seen this degree of spontaneous outrage toward any other policy."

Pierre Poilievre, finance critic for the opposition Conservative Party, said that the backlash against the proposals has been "immense," and that the package would "raise taxes on our middle-class farmers and local business owners."

Poilievre has written to Parliament's finance committee to ask that it reconvene early for five days of hearings on the proposed changes. He said that, on the current parliamentary timetable, the committee will not meet again until shortly before the consultation closes, "making it impossible to even produce a report by the deadline."

"Neglecting to hear from representatives of millions of affected taxpayers would be an abdication of the committee's responsibility," he argued.

TAGS: capital gains tax (CGT) | compliance | tax | investment | small business | business | tax compliance | small and medium-sized enterprises (SME) | professionals | tax planning | tax rates | Canada | tax reform | trade association | trade

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