An Accountant’s Viewpoint – Part 9
It’s hard not to be caught up in what is potentially the largest tax changes to hit private corporations since 1972. Last month I provided a brief overview of the three key components of the tax proposal. This month we will look at what is being said about it in various circles across the country.
Rumors have it that the basis of these tax proposals came from the world of academia. The paper entitled “Piercing the veil – private corporations and the income of the affluent” by Michael Wolfso et al. of the University of Ottawa, McMaster, and York University, appears to have found a home with the current government’s attempt at fairness. The purpose of this paper was to reflect the authors’ biased perception of inequality from a tax perspective.
Mr. Trudeau likes to talk about fairness a lot, however, much of the proposed tax changes are quite the opposite. Is it fair that when Mr. Trudeau starts receiving his MP pension that he will be able to split it with his spouse, while the doctor who used her company as vehicle to save for her retirement can’t split the distribution of profits with her spouse as retirement income? Is it fair, that when this doctor dies, that her estate will pay close to 80 percent tax on the equity remaining in the company?
Not only does the proposed tax changes destroy the retirement plans of many shareholders of private corporations, but it also challenges the Canadian economy’s growth. As we all know, most start-up companies start as private corporations before going public. Should the proposed tax changes become reality, what incentive will there be then to start a company in Canada, when you can easily start up in a more tax friendly environment like our neighbour to the south—the USA? I read a recent quote on BNN that sums up these exact concerns, it read, “Who do you trust to create jobs, the government or small businesses?”
Mr. Trudeau and Mr. Morneau are appealing to their base by inferring that private companies use loopholes to reduce their taxes. I wonder whether they have invested the time to understand our country’s current tax legislation. These current pieces of tax legislation are wonderful because they work on the basis of integration.
The bones of our current tax legislation came from the Royal Commission on Taxation (called the Carter Commission) that spanned two years of research and study. The recommendation from the commission was brought forward in 1966 and was not implemented until 1972 through years of study and debate compared to our current 75-day consultation period.
Ironically, there is even some backlash from the federal NDP, as well as prominent Liberals including the former Liberal finance minister John Manley, and several Liberal MPs. Some of our provincial leaders have also come out publicly as being opposed to the tax changes proposed. At this point in the process no one knows what will come of these proposals, but it is important to be heard. If you are concerned about the risks that these changes pose to your business, your employment, or the economy, then please be heard and contact your Member of Parliament.
Comment provided by:
Jonathon (Tug) McGraw, BCOMM, CPA, CA
BDO Canada LLP
Jonathan can be reached at: firstname.lastname@example.org