At the time of writing this, a petition against these changes was open on the CFIB website.
This is going to be ugly.
Consider the fact that it may cost small incorporated business owners up to 30 per cent more in taxes, and that may cost small business owners like myself and the women I work with an additional professional expense as we try to figure out how it will impact each of us individually.
The objective of CRA is to create integration among all taxpayers; the perspective is that the current tax rules have allowed for methods to be used by incorporated businesses to reduce the per cent of tax paid. Their defence of the proposed changes is that it creates a more equitable integration of taxes payable for all Canadians.
CRA’s response to the question of allowing incorporated small business owners tax advantages to compensate them for taking the risks of starting and growing a business is that the small business tax credit accomplishes this. The small business tax credit federally allows for incorporated small businesses to claim a small business tax credit of 17.5 per cent, which reduces dollar for dollar taxes payable on the first $500,000 of taxable income. This is a potential $87,500 ($500,000 x 17.5%) reduction in taxes payable.
Long story short: The government wishes to eliminate any incentives to hold passive investments inside an incorporated company. These investments are currently taxed at the small business rate, which is lower than the personal income rate because they are used for business purposes. But the government says this is unfair to people whose investments are taxed at the personal rate.
These rules will likely discourage family members going into business together, and will cost business owners significantly more taxes. Family members providing seed capital for a new business will now be affected by the family member facing limitations on any return they may earn on this.
Please be aware: These new rules would apply starting in the 2018 tax year.
I'm with the CFIB: This government doesn’t understand how higher taxes on our investments as small incorporated business owners will harm our ability to invest in our business, and save for the future.
I encourage small business owners to just say no. Sign the CFIB petition, call your Member of Parliament and the office of federal Finance Minister Bill Morneau. Contact Nova Scotia Finance Minister Karen Casey and let our provincial leaders know you're concerned about the future of small business in our region.
We can't simply let this go, so let's make some noise, and ask our elected representatives to step up and speak out on behalf of all small business owners.
Tanya Priske Executive Director Centre for Women in Business