Local Real Estate Agent Praises Morneau’s Changes to Small Business Tax Proposals
HAMPTON – Jason Stephen, vice president of the Canadian Real Estate Association, praised the federal government’s decision to allow incorporated businesses to put $50,000 a year into “passive investments” that act as rainy day funds for small business owners.
Finance Minister Bill Morneau was in Hampton Wednesday morning for the announcement and he also took part in a roundtable discussion with small business people that included Stephen, who was there to represent the national real estate association.
Stephen said it’s important for small business owners and people like real estate agents to save money for events like downturns, without those savings being taxed like income.
“These rainy day funds, I’m in this business, they really do exist,” said Stephen in an interview with reporters after the announcement. “Sometimes I have very good months and some months I don’t. My whole family income is based on my level of production. Those rainy day funds sound easy to attack but they’re real [lifelines] for a lot of Canadians and a lot of Canadian realtors.
“I think the measures [announced] today certainly help the ability to save and to reinvest back into businesses.”
Morneau conducted the private roundtable with area business owners at Station 33 Cafe & Yoga in the town centre. Afterwards, he made the official announcement that he would create a $50,000 threshold for “passive investment” funds. The announcement took place in a cramped room upstairs from the cafe and was aired on Facebook Live.
The finance minister has said repeatedly since the beginning of the consultation process in mid-July that he thinks many high-income earners are just trying to shelter money from being properly taxed when they make “passive investments.” He has said the practice harms the Canadian economy because the money sitting in passive-investment accounts could be re-invested in growing their companies instead.
The finance department cites statistics to back up their claims. It says Canadian-controlled private corporations (CCPCs) taxable passive income above the $50,000 threshold in 2015 represented three percent of the CCPC population but earned more than 88 percent of total taxable income.
By setting the annual threshold of $50,000, Moreau said the vast majority of businesses will not be affected by the tax changes. Any “passive investments” over $50,000 would be taxed as income. More than 80 percent of passive investment income, says the finance department, is earned by CCPC owners making more than $250,000 per year.
Morneau said the high-incomers should pay a higher tax on those investments, and small business owners should receive protection in the form of this threshold.
“We understand that many, many small businesses are using their corporations to save for the future by making passive investments,” he said. “For the overwhelming majority of corporations, this isn’t a problem. But in a very small number of cases, it gives wealthy people an unfair advantage over and above everyone else.”
Alaina Lockhart, the Liberal MP for Fundy Royal and Parliamentary Secretary to the Minister of Small Business and Tourism, said the $50,000 yearly threshold will be enough for rainy-day funds for the small business people in her riding.
“What I heard from businesses is they need the assurance that they could continue to invest in their business to grow,” said Lockhart, who attended the announcement in her own riding. “They needed to make sure they could weather any downturns in their business, and they needed to save money for their retirement as well.”
Stephen said the threshold is certainly enough for him and the other members of Canadian Real Estate Association.
“We certainly happy with any amount,” he said. “At the end of the day, $50,000 a year seems like a reasonable number. what they’re trying to do is balance the tax system – from sheltering from tax to reinvesting in the business. Certainly $50,000 will do that.”
Stephen, the former President of the Progressive Conservative Party of New Brunswick, said he’s willing to give credit where credit is due.
“I’m a voter at the end of the day. I’ve always been the type of person that recognizes when there’s a right move on either side,” he said.
“I’m in this to provide for my family my business. At the end of the day if somebody’s going to do something right to help small business I’ll give them credit.”
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