Federal proposed tax measures effect on Small Business

proposed tax measures
Federal proposed tax measures effect on Small Business
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About the Author

Faye Lyons

Faye Lyons

A resident of Oakville and government relations and communications professional, Faye Lyons is Vice President, Policy & Government Relations for the Oakville Chamber of Commerce.

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Much has happened since the federal government’s unveiling of its proposed tax measures in July. Together, communities across Canada including Oakville stood by our business owners and voiced our opposition to the government’s plan to make the most radical tax changes in 50 years.

The voice of business was heard as the groundswell of opposition grew across the country leading the government to rethink some of its proposed tax measures.

On October 16, Finance Minister Bill Morneau announced the federal government’s response to the outcry from business.

Although we are supportive of some changes the government has proposed, we remain concerned about the potential negative impacts this patchwork of proposed tax measures will have on small business investment growth and economic prosperity.

Tax Fairness? An Oakville business perspective by Faye Lyons

For example, the Chamber welcomed the move to reduce the Small Business Corporate Tax Rate and we also believe that retaining current Capital Gains Exemptions and conversion rules is good news. We commend the government for listening to the concerns of small business owners and entrepreneurs and taking action to address these issues. However, the small business rate reduction in conjunction with the tax increase on ordinary dividends could result in an overall tax increase for some small business owners.

Concerns were raised during the consultation period with respect to the new restrictions and the lack of clarity provided relating to “income sprinkling”. This tax policy change is scheduled to take effect as of January 1, 2018. Moreover, these changes could potentially also place greater regulatory burden on small business owners through the application of a more complex tax auditing process. With that in mind, we have called for the government to allow time for input from business and postpone the implementation of the changes until at least January 1, 2019 at the very least.

Similarly, another area of great concern to Oakville Chamber members is the revision of the tax treatment of “passive” income. Businesses need to save in order to weather economic downturns. They also need to accumulate capital to reinvest money back into their business for equipment, technology and facilities. This contributes to both the benefit of employees and the economy. We believe that the limit government is imposing on passive income will penalize businesses and limit their ability to prosper and grow.

Furthermore, we firmly believe that the government should not proceed with its passive income rules until a full economic impact assessment has been carried out and an approach has been developed that can ensure there will be no unintended negative consequences to business investment.

In light of the mounting regulatory burden imposed by all levels of government including increased payroll taxes and the proposed carbon taxes, we are concerned about businesses capability to remain competitive. The government needs to undertake a comprehensive review of the tax system with a view toward fairness and simplification for all taxpayers and increasing Canada’s competitiveness. To that end, the Canadian Chamber will launch its own competiveness assessment of Canada’s business tax system in 2018. The findings of this review will help shape the priorities for tax reform.

Our Chamber is proud to be working with the Canadian Chamber on these important issues and will continue to work together to advocate for a tax system that is fair and competitive for all Oakville businesses.

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