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Tax Changes Will Hurt Small Businesses

Letter Sent to the Cambridge Chamber of Commerce Membership

 

The federal government's recent small business tax proposal is punitive and will have damaging effects on business communities in Ontario and across the country.Over the summer, the federal Finance Department has made it clear that it intends to make the most sweeping changes to business taxes in 50 years.These proposed changes will negatively impact tens of thousands of businesses by raising taxes, reducing incentive for private investment, increasing administrative burdens, and making it even more difficult for a business to be transferred from one generation to the next.

 

Family businesses and family farms are being touted as tax cheats by the Federal Government. Although, they have walked that back - the fact is they have described legitimate and legal use of the tax laws are wrong and most commonly referred to as a loophole. This is not only ignorance of what it takes to build a successful business, but makes Canada the only country in the world to impose such punitive tax measures on small business. It is clear, this government has no respect for business, especially the locally owned family business.

 

The immediate reaction from our members and businesses across Canada was negative. We are particularly worried about the effects of the proposed tax changes for small and medium sized businesses - who are essential to our thriving local business community. We encourage local businesses to contact our  MP to provide feedback on the possible changes.

 

Bryan May, M.P., Cambridge & North Dumfries
534 Hespeler Road (Main Office)
Suite A4
Cambridge, Ontario N1R 6J7
Telephone: 519-624-7440 Fax: 519-624-3517 

Bryan.May@parl.gc.ca

 

Marwan Tabbara, M.P. Kitchener South - Hespeler
153 Country Hill Drive (Main Office)
Suite 2A
Kitchener, Ontario N2E 2G7
Telephone: 519-571-5509 Fax: 519-571-5515 

 Marwan.Tabbara@parl.gc.ca

 

 As an organization, we support reasonable attempts to reduce tax evasion or loopholes. However, these changes are insulting to businesses that have worked within the rules in good faith to build their businesses, to save for retirement, and sometimes just to keep their doors open.

 

Small Business is Too Big To Ignore and we need to demonstrate this with one voice.  

 

If you're not a small business owner but work for one, ask Mr. May and Mr. Tabbara to protect YOUR job by supporting small business entrepreneurs in Cambridge.

 

SIncerely,

 

Greg Durocher

Cambridge Chamber of Commerce

President/CEO 

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Are you a business owner? Your MP needs to hear from you

If your business is incorporated, 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:

 

  • Do you employ family members? The government wants to scrutinize their compensation to apply a much higher tax rate on income they consider “unreasonable.”

  • Do you invest the profits from your business? The federal government is proposing to tax that income at an effective rate of 70%. 

  • 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.

 

Thirty-five business groups, including the Canadian Chamber—on behalf of the hundreds of thousands of members they represent—have presented a letter to Finance Minister Bill Morneau asking the government to take these proposals off the table and instead meet with the business community to address any shortcomings in tax policy affecting private corporations.

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Federal Government considering major changes to corporate taxes

Finance Canada Is Considering Major Changes to How Corporations Are Taxed

 

The Department of Finance Canada is considering major changes to how corporations are taxed. The proposed rules could have a significant impact on many Canadian businesses: potentially raising taxes, increasing the administrative burden on SMEs and heightening the impact on family-run businesses.

 

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.” There are four key changes that will affect business:

 

  • Sprinkling income using private corporations: The government wants to tighten rules to prevent a business owner from unfairly transferring income to family members who are subject to lower personal tax rates. In certain circumstances, owners would have to demonstrate that wages and dividend payments are “reasonable.”
  • Multiplying the Capital Gains Exemption: When an individual sells a small business, the first $850,000 of capital gain is exempt from taxes. The government wants to prevent tax planning structures that enable multiple family members to use their exemptions.
  • Reducing the tax deferral advantage on portfolio investment inside a corporation: Currently, an owner can accumulate portfolio earnings inside a corporation and pay corporate income tax rates (which are generally much lower than personal rates). The owner defers paying personal income or dividend taxes until the money is taken out of the business. The government is considering alternatives that would reduce this tax advantage.
  • Converting a private corporation’s regular income into capital gains: Income is normally paid out of a private corporation in the form of salary or dividends that are taxed at the owner’s personal income tax rate. In contrast, when a business is sold, it is taxed as a capital gain, where only one-half of capital gains are included in income, resulting in a significantly lower tax rate on income that is converted from dividends to capital gains. The government wants to tighten the rules to prevent certain tax planning structures, but it is open to more favourable treatment for genuine family business transfers.

 

The Canadian Chamber of Commerce and its Taxation Committee are currently studying how the proposed changes will affect members in different industries, in family businesses and those with different ownership structures. They will be submitting recommendations to Finance Canada.

 

Should you wish to participate or provide input, please email the Cambridge Chamber at greg@cambridgechamber.com.  In particular, we are looking for detailed examples and cases of how a specific small business will be affected by the changes. We feel concrete examples will be most effective in making our case for easing the changes. We would ask that you send them to us by August 18.

 

Click here to view the consultation documents released by Finance Canada.

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