This commentary was written by The Saint John Region Chamber of Commerce Board of Directors Treasurer Donna Mazerolle, CPA, CA and Board Member Dean Mullin, CPA, CA.
On July 18, the Canadian federal Finance Minister, Bill Morneau, announced the release of a consultation paper and draft legislation which, if enacted, will have a dramatic impact on the taxation of Canadian private corporations and business structures that Canadian entrepreneurs have had in place for decades. They have given the public till October 2 to put forward their thoughts on the proposed changes.
They describe these as changes to close loopholes that allow wealthy Canadians to avoid higher tax rates. The problem is that the changes as proposed will impact not only successful corporations, but most, if not all, business owners, regardless of their size or wealth. This will end badly for our community and the people who form the backbone of our economy.
Small business operators drive the Canadian and our local economies. They put in long hours and take risks with their money, they invest and they work in the hope of being successful and reaping the benefits. That being said, many businesses fail within the first five years.
The federal government says they want to level the playing field with other tax payers who have no risk, regular holidays and benefits, including pensions, medical plans, paid vacation, etc. The successful businesses pay for those for their employees as well as the owners.
We believe everyone should pay their taxes but we won’t have tax payers if we don’t have employers to give them a job. Raising taxes on the successful business, the engines of economic growth, will remove the incentive to work hard, risk more and grow.
These changes are coming at the very time the United States is looking at reducing their tax, especially for business owners, to drive the economy and attract manufacturing and smart jobs to their country.
Where would you go to set up if you have a cutting-edge technology or new product? Obviously where the rewards of their success are highest; not in a country that targets the people who create the jobs. We will, in fact be penalizing the best and the brightest for being just that.
We already have some of the highest personal income tax rates for successful people. Further, these proposed changes will impact your doctors and other highly trained professionals. Doctors like many other professionals, incorporate their practices as small businesses to function more efficiently.
To strip away advantages of being a business will make Canada a less attractive destination. We have a shortage now for doctors. They are being perused by other countries, especially the United States, who also have a significant shortage and provides the ability to earn much higher incomes.
We as a country cannot create anymore obstacles to recruiting and retaining doctors if we expect to deal with our aging population.
The Chamber of Commerce is trying to educate the federal government on the importance of the business sector, including professionals. People need to contact their federal government representatives and let them know that businesses and professionals are not where the government should be looking for more money to cover the deficit. There are lots of ways to address their challenges, including enforcing the legislation currently in place.
Punishing the people who take the risks, that create the jobs and employ the people, is not a long-term solution. The Federal Government should not be taking actions that will move the people away from Canada and decrease the incentives for those who take risks that will grow our economy.
No one starts a business just to save tax. Higher taxes have however stopped people from growing their business.
The Saint John Region Chamber of Commerce represents close to 800 business, 85 percent are small business, employing 20 people or less. Our members know what these changes will do to their desire to continue investing and employing their fellow residents. Reduce the benefits and you reduce the desire to take the risks needed to grow and employ more people.
Let the federal government know you support our business owners.