Ninety-five per cent of tax professionals and small business owners say the proposed federal tax changes will hurt middle-class business owners and their families, according to a survey conducted by the Canadian Federation of Independent Business (CFIB).
"The government is trying to convince the public that these proposed changes are meant to support the middle class – that they are only targeting high income business owners,” stated Dan Kelly, president of CFIB in an announcement Sept. 21. “The reality, however, is these are broad-brush proposals that are going to affect businesses at every income level across the country. Nine out of 10 business owners have told us that these tax changes are significant to their business."
One tax change would make “income sprinkling” more difficult for families, which allows a business owner to redistribute income to family members as salary, wages, or dividends. The survey found this change would affect two-thirds of small businesses, of whom over 50 per cent share income with their spouse.
Another change targets passive investment. The proposed change would limit business owners from keeping certain investments in their own business, which allows entrepreneurs to have money aside as a safety net in case of economic downturn and emergencies, says the CFIB. The survey found 65 per cent of business owners hold passive investment.
Implications are huge
"The implications of these changes for small businesses—and by extension to the national economy—are huge," said Kelly. "These aren't loopholes for the wealthy, as the government claims. These are legitimate ways for small business owners to grow their business, ensure the stability of the firm during uncertain times, or to save for their retirement. Without these measures, businesses will not be able to create as many jobs for Canadians."
In a separate announcement issued Sept. 22, the CFIB called on Canada's premiers to join small business owners in the fight against the federal government's tax proposals.
"We are urging all premiers to join us in asking the federal government to take these proposals off the table until they conduct a comprehensive consultation with the business community and provincial governments," stated Kelly.
For more on this issue, see this article from the August/September edition of The Insurance and Investment Journal.