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Trudeau Holds Ground On Controversial Tax Changes

by Mike Godfrey,, Washington

05 September 2017

Canadian Prime Minister Justin Trudeau has said that he will "make no apologies" for the Government's approach to taxation, following a backlash against proposed changes to tax planning rules.

In July, the Government launched a 75-day consultation on how best to crack down on three tax planning practices it believes are being used to gain unfair tax advantages. The consultation focuses on so-called income sprinkling, the retention of passive investments in a private corporation, and the conversion of the surplus income of a private corporation to a lower-taxed capital gain.

Speaking in Saskatoon, Trudeau said: "We are doing more for the people who need it, less for the people who don't. I will make no apologies for this approach. It's what Canadians expect of us when we say we are going to grow the middle class and those working hard to join it."

Trudeau did however note that the Government is currently engaged in a consultation on the proposals. He said the Government is "hearing feedback from Canadians that want to make sure that this does help the middle class and that is what we are very much focused on."

Trudeau stressed that he is "happy to have discussions and feedback from interested Canadians who want to make our tax code fairer and we're going to take all of those reflections into account."

Last week, 35 business organizations wrote to Finance Minister Bill Morneau to ask that he scrap the proposals. Forming themselves into a Coalition for Small Business Tax Fairness, the groups criticized what they said were "sweeping changes that will affect all sectors of Canada's business community."

The letter said that small businesses felt they are being "unfairly targeted, intentionally or not, by the changes and painted as 'tax cheats' by the federal Government simply for accessing tax planning tools that they have been encouraged to use for decades."

According to reports, Morneau held an hour-long conference call with Liberal MPs concerned about the impact of the plans. A spokesperson for Morneau told the Financial Post that the purpose of the call was for the Minister "to listen to his colleagues, to dispel some myths and clearly state why the notion of tax fairness and our promise to the middle class are really at the heart of what we're proposing here."

The party caucus will meet this week.

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

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