The federal government has released a consultation document proposing major changes to how businesses are taxed and are asking for public feedback until October 2, 2017.
We, as Chambers’ of Commerce from across Prince Edward Island, representing over 1900 businesses, oppose the proposed changes to how businesses are taxed in Canada on the grounds that they punish small business and discourage entrepreneurship.
WHAT DO THE CHANGES MEAN FOR BUSINESS OWNERS?
When a business has a successful year, they have the option to save extra revenue and invest it in their business to earn “passive” income. To business owners, this money is an emergency fund that can carry them through an economic downturn. These reserves, and the income they generate may be used to pay employees wages when business is slow. They may also be used to help expand business operations in the future.
Currently, these savings are taxed at a rate of approximately 55%. The proposed changes could see this rate increase as high as 75%. The document says this measure is intended to crackdown on “high income individuals,” but the rules would apply to all incorporated businesses in Canada – businesses like restaurants, retailers and farmers. By raising these taxes, government punishes entrepreneurs for reinvesting their own money to help grow their business, and the economy.
2. Business owners must prove the amount of time and investment a family member puts into the business is “reasonable” compared to their payment received. (Read more)
This unfairly paints family-run businesses in a negative light. Not only does this create unnecessary and costly administrative hurdles, it devalues the risk that all family members invest in the business. Small businesses are family businesses – with a commitment by all family members. Entrepreneurs put their life savings at risk, and consequently, so do their spouses and children.
A tax specialist estimates that if these changes take effect, a small business owner earning $50,000 a year, who splits their income with their spouse, will pay $225 more a month in income taxes. This is a 27% income tax increase.
3. Entrepreneurs who want to sell their business and retire could see their tax rates increase significantly. (Read more)
Many business owners plan their retirement around selling their business. In certain cases, the current proposal will see taxes on the sale of businesses double or triple. This will result in a huge loss of funds intended to support business owners and their families during retirement years.
STAND UP FOR SMALL BUSINESS IN PEI
Share your concerns with our local federal representatives in the form below.
By checking the box and submitting the below form, you are letting our representatives know that you do not support these changes, and are asking them, with their colleagues, to stop these tax changes that discourage economic growth and punish our hard-working business owners and their families.
Your e-mail will automatically be sent to: Member of Parliment for Egmont, Bobby Morrissey; Member of Parliment for Malpeque, Wayne Easter; Member of Parliment for Charlottetown, Sean Casey; Federal Minister of Agriculture and Agri-Food and Member of Parliment for Cardigan, Hon. Lawerence MacAulay; Federal Minister of Finance, Bill Morneau.