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Business coalition opposing tax changes continues to grow, even after changes announced

Despite the federal government’s partial adjustments to its small business tax changes, business groups are still troubled about the potential negative effects the revised proposals will have on small and medium-sized firms. 

The concerns are spelled-out in a new letter to Finance Minister Bill Morneau by the Coalition for Small Business Tax Fairness, a unified voice of now almost 80 organization, including HRAI, representing hundreds of thousands of business owners across the country.

In the letter, coalition members praise the government for reinstating its promise to reduce the small business corporate tax rate to 9% by 2019. They are also pleased that the government has stepped back from measures relating to the conversion of income into capital gains and that they have recognized the importance of passive income to a business.

The Coalition for Small Business Tax Fairness, however, is still concerned about the tax changes in their current form:

Income sprinkling rules

While the government has offered to simplify the proposed “reasonableness test” for business owners paying dividends to adult family members, they have not provided any further details. The coalition recommends that the government postpone the implementation of this change, by one year, to January 1, 2019 to provide small businesses with sufficient time to implement required changes to existing business structures.  

Passive investments

The revised proposal allowing incorporated businesses a passive investment income threshold of $50,000.00 is insufficient for those who are saving to grow and create more business opportunities. The coalition therefore recommends that the government drop the passive investment rules until a full economic impact assessment has been completed.

Intergenerational transfers

Owners of family businesses are pleased that the government has expressed openness to make it easier and less costly to transfer a business to the next generation. Moving forward, the coalition recommends that the government make amendments to a section of the Income Tax Act that currently makes it easier to sell a business to a third party than to a family member.

Given the complexity of these proposals, more analysis and consultation is needed to ensure that these changes do not harm small businesses, the backbone of the Canadian economy. The coalition stands ready to work with the government to find solutions that won’t adversely affect small business’ ability to grow, innovate and create jobs.

The Coalition for Small Business Tax Fairness is encouraging business owners and other concerned Canadians to contact their Members of Parliament and use the hashtags #unfairtaxchanges #taxesinéquitables on social media. For the full list of Coalition members, please visit smallbiztaxfairness.ca.

For more information, please contact Scott Papp, Manager, Contractor Division, 800-267-2231 x 233 or email spapp@hrai.ca.