Small biz takes Morneau to task over tax changes

The Coalition for Small Business Tax Fairness is asking Finance Minister Bill Morneau to take more action on the government’s proposed tax changes for private corporations.

Read: Feds to tie passive income threshold to small business deduction

The coalition, which comprises 73 organizations representing hundreds of thousands of Canadian business owners, says in a release that budget 2018 proposals for passive investment income will create “an entirely new group of losers.”

“These new proposals unfairly penalize small business owners who have spent years saving to weather downturns and make future investments in their employees and their business,” says Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), in the release. “Unfortunately, the new approach means many firms with existing passive investments will lose access to the lower small business tax rate on future business income.”

Read: Post-budget passive income strategies

He says small business owners tell his organization they’re being unfairly stripped of access to the small business tax rate and are potentially facing “tens of thousands in higher corporate income taxes every year.”

Kelly urges the government to commit to “find common sense solutions to help businesses grow and prosper” as they face increased competitive uncertainty.

Earlier this month, the Parliamentary Budget Officer (PBO) released a report that indicated 900 families earning less than $100,000 could be impacted by the new income sprinkling rules. The PBO’s report also indicated that the government’s revenue from income sprinkling changes would be higher than calculated by Finance.

Suggestions for Morneau

In a recent letter to Morneau, the coalition asked the government to conduct an economic impact assessment of the proposals and delay implementing any tax changes until that assessment is complete.

The coalition also asked the government not to proceed on passive investment income proposals. However, if the government is determined to proceed, the coalition asked that past passive investments be excluded when determining eligibility for the small business deduction going forward.

It also asked the government to index to inflation the proposed $50,000 and $150,000 passive income exemption limits.

On income splitting, the coalition asked that changes be postponed until Jan. 1, 2019, and that the government consider a full exemption for spousal income and dividends.

Read the coalition’s letter to Morneau.

Also read:

Golombek’s thoughts on new passive income rules

What the new RDTOH rule means for business owners