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Billythreefeathers
08-13-2017, 11:15 AM
Small business owners say they are unfairly targeted by proposed tax changes

http://www.cbc.ca/news/business/tax-angry-business-loopholes-morneau-tax-consultations-income-sprinkling-passive-investment-income-1.4242280

Don Paton spends most of his days pricing new jobs around the factories and industrial sites of Hamilton, or in hands-on work making the electrical connections for the cranes his company installs and repairs.

The rest of his time he spends at a computer, usually tackling administrative work for his business, Ontario Crane Service. But last week he sat down to give Bill Morneau, Canada's finance minister, a piece of his mind.

"To me it's like, they're trying to pit one part of society against the other part. Anybody who owns a business is a bad person, because they've got money in the bank, or they've got a rainy day fund," he says.

His gripe is the federal government's proposal to close what it calls tax loopholes that private businesses use. Practices, the government's literature says, used to "gain unfair tax advantages."

Paton, and a growing number of business owners across the country, disagree.

3 changes considered

Last month, Morneau launched a 75-day consultation period for three proposed changes:

The curtailment of "income sprinkling," a method by which business owners shift a portion of income to family members, either through salary or dividends.
The curbing of "passive investment income," which the government describes as the investment of money left in a corporation, for purposes other than to invest directly in growth.
The conversion of a corporation's regular income into capital gains, which typically attract a lower tax rate.
The first two measures are attracting mounting criticism.

Passive investment income

Money left "passively" invested within the business, Paton says, has an important purpose. "They want me to take that cash out of the business so they can take more tax off it, and meanwhile if I hit a rough patch or a downturn I'm going to have to go to the bank and borrow that money and pay interest."

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Left in the business, the money is subject to the relatively lower small business tax rate, allowing Paton to invest a larger sum. But he bridles at the suggestion of unfairness.

If he was an employee, he points out, there would be layers of government protection, including labour laws mandating severance payments, between him and the business cycle.

But running his own business, it's his job to make sure he can still pay his five employees through a downturn. That sheltered investment isn't necessarily just for his own benefit.

Income sprinkling

In downtown Calgary, David Wallach shares similar concerns, although, for the president and majority owner of a real estate services and management company, his objections extend to a crackdown on "income sprinkling."

Sometimes this takes the form of paying salaries to other family members who work for the business. But the government is also taking aim at the practice of dividend payments to family members, something that hits close to home for Wallach.

He owns his majority interest in Barclay Street Real Estate through a holding company, the shares of which are divided 50/50 between him and his wife.

In good years two of the last four those shares have paid a dividend. Wallach says the money paid to his stay-at-home wife (taxed, but at a lower rate than if the money all accrued to him) helps to compensate for the risk the whole family has borne through his entrepreneurship.

"If, God forbid, I divorced my wife of 33 years tomorrow, the government would say that half this business belongs to her. She stayed home and raised our three children, she's participated in the risk, the whole family did. So why shouldn't she be paid."

Wallach also points out that Alberta has been mired in a deep economic funk for several years. He's had to meet payroll from his own pocket, he says, "but it's not my pocket, it's my family's pocket." He's also, in the past, risked the family home as collateral for a loan to the business. The risk of business, he says, is shared by the family, and tax law should recognize that.

Anger spreading

The Canadian Federation of Independent Business, representing more than 100,000 members, says it's heard mounting dissent about the tax changes.

"We're getting more understanding of what the potential impacts might be, and it's, I think, much broader than we initially thought ourselves. And I think this idea that it's targeting only wealthy individuals or professionals is not true," says Corinne Pohlmann, senior vice-president of national affairs.

"Members in all types of sectors, and definitely many members who are not considered wealthy, are very concerned about the impacts of this on their businesses."

Kim Moody, director of Canadian tax advisory at Moodys Gartner Tax Law in Calgary, says the clients he's briefed have been horrified. But the issue, he suggests, cuts deeper than just tax.

"This is about economics. What the government will do here is stifle entrepreneurs who have been the backbone of Canada's growth and all in a 75-day consultation period, held mainly over the summer, when everyone, including the government bureaucrats supposedly listening, are on holiday."

Billythreefeathers
08-13-2017, 11:15 AM
liberals like screwing the little guy

FallisCowboy
08-13-2017, 11:44 AM
liberals like screwing the little guy

Cause they figure us little guys can't fight back and we "little guys" tend to be fiscally conservative in our thinking. It is a targeted "screwing". But they sure do like giving our money to their "friends" at Bombardier, Omar Kahdr, etc.

Zinilin
08-13-2017, 11:46 AM
A loophole is a tax rule that benefits people in the wealth generating private sector.

LB303
08-13-2017, 11:56 AM
What the government will do here is stifle entrepreneurs who have been the backbone of Canada's growth … and all in a 75-day consultation period

similar to other ill-advised policies they've rushed headlong into

or is it by design, I can see that the class warfare principle is in play here

FallisCowboy
08-13-2017, 12:03 PM
similar to other ill-advised policies they've rushed headlong into

or is it by design, I can see that the class warfare principle is in play here

Yes, I do see that as well. Of course being Libtards they have conveniently chosen to ignore how that played out in the Roman Empire, French Revolution, and so many other class wars.

Forbes/Hutton
08-13-2017, 12:41 PM
Conrad Black pays about 5 million a year in Canadian taxes. Think he uses 5 million worth of government services? And yet it's mostly those who pay no net taxes that want "fairness" by taxing the rich more and in the meantime it's a grocery list of government services that they make use of.

The fairest tax system is a head tax. Everyone pays the same, regardless of income. If you end up not making enough to pay your year's taxes, you loss access to government services and the vote.
The second fairest would be a flat income tax. Everyone, regardless of income, pays, say 20%. No deductions, no right-offs. No tax forms to fill. We would probably save a billion a year with the CRA staff let go.

It's a garbage system where half the population pay net zero in taxes, but they get the exact same say (vote) as those who pay the actual bills, including those who pay millions.

LB303
08-13-2017, 12:56 PM
Are you saying only the 'landed class' should get the vote?... Dickensian England doesn't sound very appealing

Zinilin
08-13-2017, 01:03 PM
Are you saying only the 'landed class' should get the vote?... Dickensian England doesn't sound very appealing
No. Only the Productive Class.
Once the Unproductive Class (Net-Tax Getters) get to be about 40% of the voting population they will vote themselves all of the wealth (income) of the Productive Class. That is how the country will fail (ex. see Greece)

TJSpeller
08-13-2017, 02:02 PM
If the government goes through with this attack on small personal corporations, I know several people who will be forced to lay off staff, or will just reduce their working hours (and as a result reduce staff).

If you are a 50+ year old person who has worked hard and have a small corporation to help you fight the constant attack on income by the government, tt's pretty unattractive to continue to work at that intensity for a tax rate that will vary between 54% to 73 (http://nationalpost.com/opinion/allan-lanthier-morneau-turns-to-class-warfare-to-justify-a-massive-attack-on-high-earners/wcm/46fd67e6-50a6-4f7a-817f-193922f15085)% in some provinces. The European socialist countries and Britain tried this a few decades back. It didn't work out well.

I would have thought Morneau would know better. He actually had a job in the real world for a while.

But me tell you exactly Chrystia Freeland said about taxation at a debate one time: "Wouldn't you prefer to pay a few percent more taxes so that we can live in a more civil society"? That's the Liberal attitude among the relatively smart ones. Of course, among the dumb ones it's just "free stuff".


EDIT:
And all that, just for 250 Million in extra tax income. Consider how much we've committed to spend outside of Canada that will mostly end upgoing to warlords and corrupted officials and businesses. Or, it's about 25 Khadrs (the new monetary unit for government waste).

RangeBob
08-13-2017, 03:25 PM
In reading the original post,
it occurs to me that The Canadian Federation of Independent Business and Moodys Gartner Tax Law and similar companies,
are going to have to explain to the Liberals about the impacts of this on business.
One of the benefits of having an Economics major as prime minister and finance minister is that such didn't need to be explained -- they already know these things.

Since business is second only to defence (survival) as a primary national interest, because everything else flows from that, it is critical to get right.
by 'everything else flows from that' I mean All the 'feel good' policies that the Left wants to do, are only possible because we are, and as long as we are, rich.

I'm reminded of the tiny book "Common Sense" by Thomas Paine, in which he recommends that the people who are elected should be people who know first hand of a problem in government, and go to represent essentially to make practical laws that fix the problem they know are wrong and how to fix. You don't get politicians from this model, you get experts. You don't get lifelong politicians needing huge unemployment/retirement plans relative to few years served, you get term limits as a side effect.

LB303
08-13-2017, 03:47 PM
No. Only the Productive Class.
Once the Unproductive Class (Net-Tax Getters) get to be about 40% of the voting population they will vote themselves all of the wealth (income) of the Productive Class. That is how the country will fail (ex. see Greece)

I've always been in favour of this simple incentive system. You're a net payer of taxes, you get a say in how it gets spent. You're a net payee, just be thankful and try to do better. Too common-sense to ever have a chance, I fear.

FallisCowboy
08-13-2017, 05:43 PM
And some of us actually allow others to be payers of taxes as well (small business owners); I have 11 employees.

Relic49
08-13-2017, 06:22 PM
liberals like screwing the little guy

BIG TIME

tdod101
08-14-2017, 08:44 AM
Yes, I do see that as well. Of course being Libtards they have conveniently chosen to ignore how that played out in the Roman Empire, French Revolution, and so many other class wars.

Oh please, comparing modern day Canada to the fall of the Roman empire or the French revolution is asinine, in those days people had nothing to lose, and were tough as nails. Canadians are the biggest sheeple on earth and the Canadian govt is pro at pulling the wool over the public's eyes. As long as everyone has their Tim Horton's beer and smokes with home depots and Walmart down the street no one complains.

Waterloomike
08-14-2017, 09:27 AM
Cause they figure us little guys can't fight back and we "little guys" tend to be fiscally conservative in our thinking. It is a targeted "screwing". But they sure do like giving our money to their "friends" at Bombardier, Omar Kahdr, etc.

Clintons.

Waterloomike
08-14-2017, 09:31 AM
They are unfairly targeted.

The turd started the snowball downhill by saying they were rich people looking for tax writeoffs.

Also, they don't have legions of lawyers and accountants. Or seldom any well connected elites or politicians.