The Coalition for Small Business Tax Fairness has written a new letter to Finance Minister Bill Morneau with professional analysis confirming that Ottawa’s tax proposals will affect middle-class business owners.
“It is the farmers, mom-and-pop shops, and entrepreneurs, who invested everything into their businesses, that will be most affected by these changes, instead of targeting the real problem,” says Perrin Beatty, president and CEO of the Canadian Chamber of Commerce, in a release.
The government claims the proposals won’t affect business owners with incomes under $150,000. Tax practitioners disagree.
One of the new rules introduced would restrict small business owners from sharing income with family members. Tax practitioners say this can affect business owners with incomes as modest as $50,000. Also, as two-thirds of Canadian incorporated businesses are majority-owned by men, the restrictions on sharing income with a spouse are likely to remove a disproportionately higher number of women from benefiting from their family’s business.
The government also proposes changes that would discourage small business owners from holding passive investments in the incorporated company. According to tax practitioners, business owners retain business earnings in the corporation to safeguard against economic downturns, secure bank financing and invest in other startups.
In its letter, the coalition says tax practitioners are “united in the view” that the proposed changes would result in higher combined corporate and personal taxes for business owners across the board, and in many cases, small business owners would incur tax rates far greater than what an employee with a similar level of income would pay.
The coalition, which has doubled in size since August 31, is asking the federal government to review the analyses of tax professionals across the country, take the proposals off the table and launch meaningful consultations with the business community to address any shortcomings in tax policy.