With the resumption of Parliament, Justin Trudeau and Bill Morneau have been getting an earful on the tax changes they are proposing to impose on small business owners and professionals like doctors. They are getting at least as much pushback from Liberal members as they are from the opposition. The plan would close so called “loopholes” such as income redistribution, and the ability to accumulate income in a business against a future downturn. It didn’t help that in the torrent of clichés, buzzwords and other pious sentiments that accompanied the budget; that the government seemed to be lumping entrepreneurs who have been taking advantage of these legal tax measures for years with tax cheaters. In the absence of any particular public outcry against the tax system, it is difficult to determine from where the pressure for these controversial changes came. It is estimated that the changes will bring in tops, an additional $250 Million on a budget of almost $300 Billion– or less than one tenth of a percent. The government could raise as much as ten times that amount by simply raising the corporate tax rate by a point—still leaving Canada as one of the more competitive tax jurisdictions in the advanced economies. While it is true that the current tax system allows small business owners and professionals tax advantages not available to a salaried taxpayer, it should be noted, however, that small businesses are also generators, and collectors of HST. In Ontario that means entrepreneurs and professionals send governments $13 dollars for every hundred dollars of income generated by their business. This is government revenue that would not have existed if the individual had not chosen to start an enterprise or practice. When the government talks about “fairness” it should take all sources of taxes into account not simply personal taxes. It is ironic also that small business owners have become the last bastion of people who are prepared to write cheques in support of political parties. The government has needlessly alienated a class of voters who they very much need if they are to stay in office, with little or no financial gain to the treasury.
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