The government is proposing several major changes, including:
- Increasing the effective tax rate on non-active business income, e.g. if you accumulate extra money in your company (as part of your retirement strategy), The effective rate, by the time you take this money out, would be 73%
- Reducing or eliminating the ability to pay dividends to your family members
- Eliminating the ability to utilize your family members' individual lifetime capital gains exemption on the small business you may hold in a family trust
While it can be argued that some of these have been used to advantage, business owners would argue that they take much larger risks than an employed person. Here's an article that summarizes some of the unfairness.
More importantly, there are many many unintended consequences of the proposed legislation in it's current broadly drafted form.
A couple of examples:
- Suppose you own a snowplowing business, and plow the parking lot of the local credit union (you bank there). This income would be taxed at a much higher rate because you have an "interest" in the credit union. (Remember the $5 they charged you for a share when you joined?)
- Dad and daughter have a farm, and son (who left to seek his fortune) owns a construction company. D and D hire son to build a barn. This income is also caught and taxed at a much higher rate.
There's also the potential for a 93% effective tax rate that is the result of a number of tax instances over the life cycle of a business, and is explained in detail here (for those who have trouble sleeping)
(If this type of article makes your eyes glaze over, skip down to the example - it's plainly written)
Here's a template letter that you can use to write your MP. For your convenience, I have included the names, addresses and telephone number of all the MPs in the Ottawa area, so you can just delete the ones that aren't yours.
And, by the way, letters to your MP don't need postage :) Thanks for supporting your local small businesses (and yourself!)
Want more information or help with this? Email or call to speak with me personally!