You can count the Battlefords Chamber of Commerce among a growing number of opponents to federal government changes to small business taxes.
The chamber has publicly voiced concern over the changes impacting incorporated small businesses across Canada. Those proposals include rolling back income splitting, removing capital gains exemptions and reducing tax deferral advantages for small business.
“I’m hoping they change their mind on this, or at minimum at least pause for more consultation,” said Warren Williams, president of the Battlefords Chamber of Commerce, in speaking to the News-Optimist on Tuesday.
Williams said the Battlefords chamber is joining up with the Saskatchewan chamber and the Canadian Chamber of Commerce in opposition to the changes.
Their position is the same, he said.
“This needs to be looked at further, and at minimum we are asking for the review process to be extended until March, 2018.”
The changes were announced in July by finance minister Bill Morneau, with consultations to run until Oct. 2.
At the time, Morneau said the reason for the move was to cut down on wealthy Canadians using the tax system to their benefit.
"Many of the richest Canadians are unfairly exploiting the tax rules designed to help businesses thrive,” said Morneau in a statement July 18. “We know that businesses, including small businesses, help grow the Canadian economy. These tax advantages are in place to help these businesses reinvest and grow, find new customers, buy new equipment and hire more people. We want to make sure those rules are used to do just that, and not to give unfair tax advantages to certain – often high-income – individuals."
But Williams called Morneau’s comparisons “slanted,” saying it is really small business owners and private practitioners who will bear the brunt of the change.
“The federal finance minister is drawing some comparisons that are favourable to their plan, which are not really based on reality,” said Williams.
“Suggesting that small business owners are cheating the taxes, you know – that’s insulting, frankly.”
The impact on small business will be extensive, according to the chamber’s news release from last week. According to the chamber, for businesses that employ family members the government wants to scrutinize their compensation and apply a much higher tax rate on income which they consider “unreasonable.” If profits are re-invested in the business an effective tax rate of 70 per cent could be imposed. Finally, the chamber points to tough new rules making it difficult for children of business owners to get the capital gains exemption, which could result in double-taxation.
Williams explains the federal government is looking to roll back a number of changes that were previously brought in, such as income splitting with family members as a way to minimize tax impact.
But those changes were designed to help small business, he said.
“It was not brought in to minimize the tax impact on the ‘bourgeois’ wealthy people,” said Williams.
“That was not what it was brought in for. It was brought in to encourage new business, small businesses. This isn’t the ‘elite bourgeois,’ you know, this is the economic engine people.”
Williams pointed to the example of what happened after the pulp mill closure in Prince Albert. That was thought to be “the end of Prince Albert” he said, but Prince Albert was able to prosper in spite of that thanks to small business growth and the jobs that they created.
The tax changes will have a big impact on the Battlefords, he said, which is dominated by small businesses that employ less than a hundred people. They comprise 90 per cent of the Battlefords region, Williams estimates.
Other business lobby groups across Canada have made known their opposition to the changes. The Canadian Federation of Independent Business said in a news release Tuesday it was going to deliver 14,691 petition letters to federal MPs, from “business owners concerned about the increased tax burden being placed on them by Ottawa.”
“In my 23 years of working on behalf of small businesses, I have not seen this degree of spontaneous outrage toward any other policy,” said Dan Kelly, president of CFIB, in a statement. “Tax experts are describing these proposals as massive changes with the potential to affect the majority of the 1.1 million small and medium-sized businesses with paid employees.”
CFIB said their petition letters were to be delivered to coincide with the caucus retreat of the federal Liberals in Kelowna, and the Conservative retreat in Winnipeg the same week. Already there were reports that the blowback to the small business tax changes was going to be a key focus of the Liberals’ retreat.
As for the chamber, Williams said they have issued a “call to action” to their own member businesses, urging them to voice their concerns in letters to the federal government. The Canadian Chamber of Commerce has also been urging their members to write letters to their MPs.
Williams is hoping there will be some reversal by the federal Liberals to the tax proposals.
“Ultimately, I hope they realize this was not the smartest thing in the world,” said Williams. He didn’t sound confident, however, saying they “seem to be on a mission with this.”
