Proposed tax code changes from Canada’s finance minister Bill Morneau to improve fairness this summer have struck a nerve in Powell River.
Restaurant owner Sarah Salome said she is furious with changes that are unreasonable and will impact regular, middle-class families, the same ones the federal government said they wanted to help.
"We're just a middle-class family trying to do good things,” said Salome. “This strategy won’t just affect those who are wealthy, it’s going to affect the middle class as well.”
Morneau has said in reports that incentives such as income sprinkling, unfairly allow business owners to reduce taxes by shifting some of their earnings to family members who do not work for the company. According to Morneau’s reports, over the past 15 years the country has seen a 300 per cent increase in the incorporation of professionals.
The federal government has stated that another of its goals is to close passive investment rules that allow personal corporations to build up a fund to be later used by the company owner for retirement. Morneau has said in his reports that the practice, which allows for deferring tax on significant amounts of money, provides an unfair advantage over non-business owning Canadians. The government also wants to close a loophole that allows corporations to convert regular income into capital gains, which is also taxed at a much lower rates.
Salome said she agrees the country’s wealthiest should be paying more and closing loopholes exploited by the rich is something the government should be doing, but the changes will not just affect the wealthy, but also middle class, small business owners.
Salome said small business owners take on the risks of opening their own companies and, unlike salaried employees, do not have a guaranteed pension or employment insurance.
"We're taking a risk every single day, shouldn't there be some incentive to that risk?" she said. "We do what we do because we're inspired by it.”
Salome is not alone. There is a growing backlash across the country as local chambers of commerce and professional groups band together to oppose the changes.
Powell River Chamber of Commerce president Cory Carr said the changes will impact small businesses that have incorporated and also professionals, such as doctors who are looking to work in a family practice.
“These changes impact middle-class business owners, of which many of our local business owners would fall into that category,” said Carr.
Carr said the changes could hurt Canadian competitiveness and create a disincentive for entrepreneurs.
“Proposing changes creates uncertainty in the marketplace and uncertainty tends to have an overall negative effect on the economy,” he said.
Carr added that the reasons for the changes have not been well articulated to business owners or Canadians.
Morneau introduced the changes in July and the federal government is currently collecting the public’s thoughts on the proposed changes.
North Island Powell River MP Rachel Blaney said her office has received a steady stream of letters, emails and phone calls since the announcement. Public consultation for the tax changes is open until October 2.
