Economy

Tax changes to make system fair not stifle business growth: Trudeau

Tax changes to make system fair not stifle business growth: Trudeau”

Following the massive outcry and pushback against the small business tax reforms, the Liberal government is set to offer a measure to Canadians affected by its proposed tax changes that would make the controversial reforms more palatable.

The consultation period on the proposals ends October 2nd but how the government chooses to proceed won't likely be known until after Thanksgiving.

The study overview also states that although the federal government reduced the second-lowest personal income tax rate, it also "scrapped income-splitting for couples with young children and eliminated a series of tax credits, which more than offset the tax savings from the rate reduction and ultimately increased the tax burden for most middle-class families". The government's proposal is to create a test to ensure any income paid to family members is fair compensation for work actually provided.

The changes were circulated in a discussion paper by Finance Minister Bill Morneau in July, with the Liberals always saying they were meant just for discussion.

Conservatives and other critics say business owners take risks others don't and don't always have access to benefits such as employment insurance.

Two new reports released this week on the issue provide fodder for both sides.

The intention really is to target high-income Canadians who incorporate in order to reduce their taxes through one or more of three now legal practices: income sprinkling; passive investments; and converting business profits into capital gains instead of paying them out as dividends or salaries.

"Closing the income-splitting loophole will have nearly no impact on small business families, much less Canadian families in general", Macdonald said.



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