Ann Scott, Presley & Partners Chartered Professional Accountants
The government’s spin is that they are trying to be ‘fair’ and that these changes only affect the 1% – the rich. And that’s simply not true.
How fair is it for the wife of a struggling business owner, having quit her high paying job to help in the business, only later hears from Revenue Canada, that her substantially reduced pay still wasn’t reasonable in their eyes? The difference is taxed at the high rate and now she has a bill for $15,000 tax. In the husband’s bracket, he would only have paid $5,000. Tax cost – $10,000.
Consider instead, the rich business owner. He’s already taxed at the top rate and arguably wouldn’t need his wife to help out in the first place. Tax cost – $0.
This is only one small example of how “Fair’ tax changes can hit little businesses harder than successful ones.
And the changes are retro-active.
Our business clients have for decades operated within the law and tax policy of Canada, enjoying lower rates on income left behind in the company to re-invest in the business and to save for retirement. There are no indexed government pensions for small business owners.
Many small business owners, abiding by the law and tax policy of the country, chose to save within their companies. They did without spending their earnings and chose instead to do the responsible thing and save for their retirement, so as not to be a burden on their family and their country.
Now, being so ‘fair’, the proposed changes intend to steal a chunk of this money.
Funny, how government employees can split their pension income with their spouses, but small business owners are using ‘loopholes’.
And, it’s one thing to say that from now on, these are the rules of the game, and quite another to say that those old rules were ‘bad’ so you have to pay a penalty now for all of those prior years.
I know small business owners and they are the risk takers, they are the employers and they are the innovators. Small business owners fund themselves, because no-one else will. Small business owners do their own retirement planning and funding. And small business owners are contributors!
The tax proposals include plans to unfairly tax small business companies. They include taxing the non-taxable half of capital gains and taxing the return of shareholder loans. Tax rates on investment income earned by private corporations is proposed to be much higher than even public corporations pay.
The tax proposals hit the middle class. The wealthy and some of the mobile middle class can move on, but the middle class is stuck here.
And who is going to take on the risk of losing their house? Instead of encouraging and rewarding risk taking in Canada, the government is vilifying those who do so and chasing them to other countries.
Shame on them.