13 OCTOBER 2017 – NIAGARA, ON
Tax Consultations – Listening to the people of Niagara Centre
On October 2, 2017, Vance Badawey, Member of Parliament for Niagara Centre, submitted
his Tax Consultation Report to the Minister of Finance, Bill Morneau.
The report outlines what MP Badawey has heard throughout the past months, both through written
submissions and from public consultations sessions that were held in the Niagara Region. Two of the public consultations sessions were organized in partnership with the Welland/Pelham and Port Colborne-Wainfleet Chambers of Commerce, and with the Greater Niagara Chamber of Commerce. The meetings well attended and good discussion was had amongst all groups.
While some residents of Niagara Centre were in favour of the proposed tax changes, some residents and small business owners were concerned with the following:
Converting Income into Capital Gains:
The conversion of salary and dividends into capital gains to attract a reduced tax rate has been an area that has generated discussion. While some argue that equal earners should pay equal tax, others argue that this is part of the reward that comes with the risk business owners take. Many have expressed their concerns which include: having a clear definition of the term “reasonableness;” how CRA will work to implement this change; and if the change itself when administered will result in more objections; appeals and lengthy due process. These processes could add additional financial burden as they wait for decisions to be made.
Passive Investment Income:
There were many discussions about the purpose passive income serves to small businesses. This by far was a topic of interest to most people spoken to. Many owners argue they do not have access to benefits that many employees enjoy and this is a vehicle to provide some of those benefits. Business owners were passionate about keeping this option available to them.
For many small business owners, concerns were expressed about the risk their spouses take when running a business. Despite not being involved in the business, spouses and even children in some cases incur substantial risk because of their association with the owner. Second, most children are involved in their family business by default and many have suggested that any involvement should be sufficient to meet the reasonable test.
Related Party Transfers:
Business owners were very concerned about the possible implications of passing on a family business to a family member costing more that if they sold it outside the family. Concern was expressed about the double taxation factor should a family member die and the shares are deemed to be sold at death. While not many had solutions to this issue, it remains very important that family businesses who have been in business for decades want to continue to be able to pass on the family business.
Contained within the report are recommendations that came from the consultations, including:
- Changing the message when communicating the final legislation and avoid sending the perception that
business owners have loopholes used to defer taxes. Business owners use professionals to build proper
tax plans which adhere to all tax rules and this message needs to be conveyed to the public.
- Introduce any changes slowly and allow time to integrate into the business.
- Phase in changes over five years to allow businesses to adapt.
- Reducing the small business tax rate.
- Reduce the personal tax rate for low income earners.
- Reduce the personal tax rate for people that earn less than $200,000.
- Offer incentives to bring small business back to Canada. If the tax reforms stay as they are, there will be a mass exodus from Canada in foreign investment.
- Distinguish between small business and those companies that allow executives and owners to pay large bonuses from their companies.
- Conduct multi-level discussions annually at various levels of government to see what each level is considering before it is implemented.
- Establish a multi-jurisdictional committee to review government initiatives before communicating to the public with an emphasis on the impact for small to medium businesses.
- Allow for consultations with business groups so the impact on business as a whole can be studied.
- Establish concrete incentives for generational businesses to continue from one family member to another without undue tax burdens.
“I wish to thank all of those who took the time to contact my office, and to all those that attended the consultation sessions in order to express their ideas regarding the proposed tax changes. As the representative of Niagara Centre it is my responsibility to listen to all community members, to hear all points of view, and to bring the thoughts of the Niagara Centre community in Ottawa. I trust that the Minister of Finance will take all of the suggestions, concerns, and comments expressed by the constituents of Niagara Centre into careful consideration as he develops legislation that takes into account the need for tax fairness while still providing support to the thriving small-business community here in Niagara, and across Canada.”
– Vance Badawey, Member of Parliament, Niagara Centre
Office of Vance Badawey M.P.