Maple Ridge chamber tells business to talk about tax changes

Federal proposals will be harmful, says business group

Maple Ridge chamber tells business to talk about tax changes

The Maple Ridge-Pitt Meadows Chamber of Commerce doesn’t like the federal government’s new tax proposals, but the Liberals say they hear the concerns.

It’s just a matter of sorting out legitmate issues with the proposed tax changes, from rhetoric or inaccurate perceptions, said Pitt Meadows-Maple Ridge MP Dan Ruimy.

Tax changes now at the public consultation stage include restrictions on how a small business divvies up profits among family members in order to lower the business taxes that are payable.

The government proposes to broaden the definition of what’s called a tax on split income so that adult children and spouses who aren’t actually involved in the business, have to pay the tax.

Another proposal is to remove some of the tax refunds possible for business investment.

The federal government is proposing to add a new rule to prevent tax planning that gets around rules meant to prevent the conversion of company profits into tax-exempt, or lower-taxed capital gains.

Ruimy points out that the number of personal corporations over the past 15 years have jumped by 50 per cent.

“The majority of changes are not going to affect most small businesses,” he said.

Finance Minister Bill Morneau said in an opinion piece “that an incorporated professional earning $300,000 with a spouse and two adult children can save about $48,000 in taxes by using one of these loopholes.”

For passive investment income to provide an advantage over what is available to every Canadian through RRSPs and TFSAs, a business owner needs to earn more than $150,000, Morneau said.

Ruimy said he’s heard from both sides on the issue, from people that are worried about business taxes increasing and from others who say, “It’s not fair that some people get certain tax breaks.

“With any change, there will always be some concerns.”

He’s working on holding a round-table on the topic and said he wants to understand exactly what people are worried about.

“This is more geared to a very high-income earning person who opens up a personal corporation to reduce their taxation.”

Meyers Norris Penny accountant Sunney Badwal said the changes will affect anyone who’s incorporated.

“We’re very concerned for all of our clients.”

He said that under the proposals, payments to family members have to be “reasonable” reflecting their level of participation in the company, in order to get tax breaks, but he notes that reasonable isn’t defined.

Badwal said many owners of small companies don’t contribute to the Canada Pension Plan so they take dividends. Now the government wants to put restrictions on dividend payments, whereas currently there are no limits on who receives dividend payments.

The proposals have been around since 1972 when Pierre Trudeau was in power. And the public has had only 75 days in the middle of summer to comment, he added.

The chamber simply calls the proposals “harmful.” The changes will discourage new businesses and investments and affect all types of businesses, the chamber said in a tax advisory.