Our guest today is Tim Miron. Tim is a partner at an accounting firm, Beckett, Lowden, Read, and a past guest.
There are a lot of changes being proposed for taxes for Canadians. Life and taxes are not fair. There are tax credits for adopting a child for example, but not everybody gets that tax savings. A single parent, for example, there is a tax credit because there is only one income, but a single person without children does not get that credit. In general, tax isn’t fair. Tax is designed to pay for government services and to motivate behaviour. The child fitness tax credit introduced a few years back was to encourage parents to get their children moving and involved in sports, etc., and be healthier. Tax changes will not be fair. What is the motivation for the new changes?
The 3 biggest changes are:
- It will be more expensive to sell your family business to a family member than to a complete stranger.
- There will be a limit to how much income you can allocate to the shareholders of your company, if they are related (the government calls this income sprinkling), only based on the labour they have put forth in the business, regardless of any other risks they have taken on or investment they might have made, to help the business move forward.
- Drastic changes to people who use their corporations or businesses to save for retirement or future business expansion, the tax rates on those are going to go up dramatically.
The last time tax changes of this size were proposed in Canada, started in 1966. They had an open public consultation on the issues they were addressing at the time. It took 2 years to consult and almost 5 years to put those rules in place. To take these kinds of massive changes to cover up actual loopholes (legitimate, unintended consequences), as well as change the intentions that you were trying to motivate, in a 75 day consultation period over the summer, is probably not the most sound way of doing things.
Doctors use their corporation to save for retirement whereas, others, for example a member of parliament, will have a pension that grows (paid by taxpayers) tax free until they retire and take it out. Whereas a doctor all the way along, saving in the corporation is paying tax inside the company. Which of these two examples is fair?
Business owners and entrepreneurs, to affect change, need to keep the pressure on by writing letters to their member of parliament (MP) – there are letters that are prepared regarding issues that can be copied and sent. Writing to the Minister of Finance is also a good way to affect changes. Making sure other business owners, regardless of size, are aware of these changes.
In proposing to close loopholes, in the sale of your business – for example, they’ve made a worse consequence for selling a family business to your kids even more expensive than it already is. To make it “fair” shouldn’t a son or daughter be able to buy the business for the same amount as a stranger?
These changes will affect the reinvesting into the economy from the small business owner. Let’s not make these changes where the end result is actually going to be worse for Canada as a whole than the current situation is, in such a drastic measure. Take some time, think about it.
Niagara Region MPs: https://www.niagararegion.ca/government/levels/mp-and-mpp-niagara-region.aspx
To search for the MP in your area or region type the area or region and MP in your search engine.