Proposed Corporate Tax Changes

On July 18, Finance Canada launched a consultation on how “tax-planning strategies involving corporations are being used to gain unfair tax advantages". The document contains proposed policies to close these “loopholes".  However, this is more than just a change to close loopholes, it is deemed to be the most radical tax overhaul there has been in 50 years. As a result, significant concerns are arising amongst businesses across Canada.

The Government is focusing on three key tax practices that they feel are being used to gain unfair tax advantages:

1. Income Sprinkling: changes are aimed to eliminate business owners from transferring income to one or multiple members of the family who are taxed at a lower rate or who aren’t taxable at all.
2. Passive Investment Portfolio: changes are aimed to prevent individuals from gaining tax benefits by investing income within a corporation.
3. Capital Gains: changes are aimed to curb private corporations converting income to capital gains and paying a lower tax rate compared to the higher tax that they would pay it if was income.

If your business is incorporated, then you could be facing a larger tax bill and big compliance costs from the government’s new proposals to change the way corporations are taxed. Here are three things you need to know about the tax changes proposed by the federal government:

1.Do you employ family members? The government wants to scrutinize their compensation to apply a much higher tax rate on income they consider “unreasonable”.
2.Do you invest the profits from your business? The federal government is proposing to tax that income at an effective rate of 70%.
3.Do you want to pass your business on to your children? Tough new rules make it difficult for younger kids to get the capital gains exemption. They could be double-taxed.

Small and medium-sized businesses (SMEs) are the engine of the Canadian economy – estimates range from 85 to 90% of all businesses in Canada are SMEs. The chamber network across Canada is using its collective voice on this issue; your voice as a business person needs to be heard as part of this initiative.

Send a message to your MP today. Government needs to know that this tax reform will harm businesses of all sizes. Don’t know where to send the message to your Member of Parliament? Look up their address using your postal code here. We’ve also included a template here that can be used to send a letter to your MP

Join the consultation and have your say: click here for Finance Canada’s information - deadline for submissions is October 2, 2017. Please send us your feedback or impact stories to: [email protected].

Here’s a few resources to help you learn more:

Click here to view our press release
Click here to view our Business Beat article on Proposed Corporate Tax Changes
Read the summary of the proposed tax changes put together by MNP
View the summary and presentation on Proposed Tax Changes for Private Corporations by JMH & Co
Click  here for information from the Canadian Chamber of Commerce
Read the article from the Canadian Chamber highlighting how 35 business associations have united to oppose the proposed tax reforms
Read the offer from the Canadian Chamber of Commerce to help host consultations for the government with business owners across the nation
Click  here for an update from Alberta Chamber of Commerce
Click  here for the op-ed from Alberta Chambers of Commerce President & CEO, Ken Kobly
Participate in this national business protest being called for by the St. John Region Chamber of Commerce
Use this hashtag to join or follow the conversation #SMEisMidClass

Contact your accountant: They are the experts. If you don’t have an accountant, contact us and we can provide you a list of member accounting firms