When it comes to describing a person who owns an Oakville business a few characteristics come to mind. Hard working, committed, risk taker and driven.
We get it. The Oakville Chamber understands the hard work that is required to be a successful business owner. The time required to navigate the regulations and legislative requirements enforced by the various levels of government. We understand the risk involved and the contribution to the economy made by entrepreneurs that ensures the viability of the jobs that they have created.
That is why, as a community, we need to stand by our Oakville business owners and voice our opposition to the federal government’s proposal to make the most radical tax changes in 50 years. These proposed changes to add a new tax on investment income in a corporation, along with new rules for compensation within a family business, are in addition to the governments increasing of personal taxes, cancelling reductions in the small business tax rate, tightening rules on partnerships, introducing new carbon taxes, increasing CPP and EI premiums.
Since the federal government’s announcement of the “Tax Planning Using Private Corporations” policy paper on July 18, 2017, there has been a significant and growing groundswell of opposition from Oakville Business owners. Not only because legitimate business owners are being labelled as “cheats” by somehow taking advantage of tax “loopholes” but more importantly because they are concerned that these proposed changes could lead to lower savings within their businesses, eroding sustainability and future investment in business growth.
a significant and growing groundswell of opposition from Oakville Business owners
Let’s take a step back for a moment. The current tax system was designed to motivate people to start a business to create jobs. By most accounts, it is achieving this goal. As presented in a recent Ontario Chamber of Commerce (OCC) report, Canadians now create new firms at a higher per capita rate than Americans, partly as a result of the rapid growth of the start-up ecosystem.
As such, Canada currently ranks as a global leader in entrepreneurship, particularly for early stage projects. But where Canada fails as a nation is seeing the majority of those start-ups continue to scale into larger, successful businesses.
In the report it was revealed that over the past ten years, 71 percent of the jobs created in the private sector can be attributed to the activities of small and medium-sized enterprises.
That being said, the government’s desire to compare the taxes paid by entrepreneurs to how employees are taxed, is like comparing apples to oranges. Private business owners are not able to enjoy the advantages of pension plans, and vacation pay. When these men and women require time off for maternity or paternity leave it is self-funded not paid for through employment insurance (EI) benefits.
It isn’t “fair” to compare a private business with an individual employee. These proposals will undermine or eliminate strategic planning done by private business for the past fifty years using the existing guidelines under the Income Tax Act.
Almost every business in Canada has passive income. Taxing business savings at 73% means there is no incentive to keep money inside the company. In fact, most owners would be better off taking it out of the company. There are very important economic reasons to encourage owners to accumulate a surplus asset within the business: it helps them to make large capital investments or weather downturns.
It isn’t “fair” to compare a private business with an individual employee.
Although the government claims to be targeting “high income earners”, these sweeping changes will have major impact on the growth of small and medium size businesses across Canada in all sectors. And it threatens to disrupt the entrepreneurial ecosystem that has been driving Canada’s economy one job at a time.
The Canadian Chamber of Commerce (CCC), along with many in the accounting profession, believe the proposed rules could potentially raise taxes, increase the administrative burden on businesses, and significantly impact family-run businesses.
The current tax system has encouraged business growth and job creation. The proposed changes threaten to make it more difficult to be a business owner and thereby stifling growth and jobs.
The Oakville Chamber encourages the federal government to join us at the table to have an open dialogue about these proposed changes. Moving forward without appropriate consultation may, through unintended consequences hurt the very people the government is attempting to help.
The government doesn’t create jobs, businesses create jobs. We need to give Oakville business the tools to continue to prosper so and their success will also be Canada's success.