Embroiled in a Canada-wide outcry over planned changes to how the tax system will treat small Canadian-owned businesses in the future, the federal Liberal government announced last Monday it will revise its proposed tax reforms, further reduce the small business tax rate to nine per cent and not move forward with measures relating to the conversion of income into capital gains.
An emergency meeting in Ottawa last week Monday showed the government has been listening to the concerns of Canadians—and Liberal MPs—about the planned tax changes.
“We are very pleased that the government has listened to concerns of business owners and has stepped back from this element of their new tax plan,” said Dan Kelly, President of CFIB. “These rules would have made it more costly for small business owners — including farmers and fishers — to sell or transfer their business to their children.”
More tweaks are likely as MPs were told further moves will be made to alleviate some of the concerns expressed by a number of small business owners, farmers and those who have “passive” investments in their businesses.
The BC Chamber of Commerce also issued a news release saying it welcomed the news.
“The measures proposed, while not perfect, are more balanced and address a number of the issues that we have raised over the past several weeks,” said chamber president Tom Dyas. “The Chamber will be vigilant though on the details and application, to ensure they actually deliver on the revisions they have mentioned.”
The chamber said it appreciated the finance minister’s call for further input from Canadian businesses.
Fuhr said the small business tax rate, already the lowest of the G7 nations, is a real advantage for all Canadian small businesses. And lowering it further makes that advantage even greater.
The government’s original proposal had aimed at limiting the ability of incorporated business owners to shift income among family members to benefit from their lower tax rates, shelter money in passive investments within a corporation and convert income into capital gains, which would be taxed at a lesser rate.
MPs emerging from the caucus meeting said they thought farmers and fishers will also be pleased with other changes that have yet to be announced.