Changes to Corporate Taxation: Your MPs need to hear from you!Last month, the Federal Government released a discussion paper on tax planning using private corporations. The proposals in this paper focus on three main areas: tax deferrals, income splitting and capital gains taxes.
The complexity and rigidity of the proposed changes will not only add to the cumulative regulatory burden facing small businesses, it will also cost small business owners thousands of dollars and discourage business investment. The government says these changes only target “the highest income earners” who have “unfair tax advantages”, but in fact this will affect hardworking, honest business owners of all income levels.
Your MPs need to hear how these proposed changes will affect businesses throughout Oakville and across Canada. Contact MP John Oliver and or MP Pam Damoff to make your voice is heard! Be sure to contact them before September 5 to make sure they’ve heard you before parliament resumes.
“Neutralizing” Tax Deferrals
The government wants to neutralize the “tax deferral advantage” associated with making passive investments through a private corporation. Business owners can leave income in a corporation (where it is taxed at a lower rate than personal income) so that they can reinvest that income and help their business grow. Keeping income in a corporation also allows businesses to cope with fluctuating businesses cycles. The government wants to eliminate any advantages from this practice by eliminating certain refunds and restricting eligibility for certain tax rates. These proposals stand to undermine legitimate investment practices and discourage business growth.
Reforming Income Splitting
The Federal Government is also proposing changes to income splitting taxation. Any individual who receives split income that is determined to be unreasonable will be taxed at a higher rate. An amount would be considered unreasonable to the extent that it exceeds the average sectoral salary. This proposal neglects the unofficial functions that many individuals receiving split income perform in small businesses. For example, a spouse of a small business owner may perform several business-related tasks outside of their job title which explains their higher-than-average salary.
Corporate Tax Reform Affects All Business Owners
Unfortunately, changes to income splitting and tax deferrals are not the only changes under consideration. The Federal Government’s sweeping proposals include additional reforms such as a restriction on the lifetime capital gains exception.
As a whole, these proposed changes would impact all Canadians who own and operate private companies, including family businesses and incorporated professionals. Ultimately, these proposals would increase the complexity of the tax rules applicable to private corporations and reverse many of the tax policies which have fostered business growth for decades. The government says they are targeting “the highest income earners” who have “unfair tax advantages”, but that is simply not true: these changes stand to affect hardworking, honest business owners of all income levels.
It is imperative your MPs hear from you directly on how these changes will affect your business before their annual Liberal caucus retreat on September 5. We encourage you to contact your MP directly with your concerns; you can reach MP John Oliver here and MP Pam Damoff here.
For more information on the proposed tax changes, contact your tax planner or contact the chamber so we can put you in touch with one of Oakville’s many professionals.
Questions or concerns?
If you have any questions or concerns, feel free to reach out to Faye Lyons, Vice President of Government Relations & Advocacy at 905-845-6613 x 211 or email@example.com .