The Ministry of Finance of the Government of Canada has announced plans to make sweeping changes to how small business corporations are accorded tax fairness. Their position is that most small and medium business corporations are tax dodges created to avoid paying taxes on business income and that the average Canadian does not have these tax advantages. That is not true.
The reality is that most small to medium business corporations were granted these tax code items over the past 50 years after careful study and follow up of economic effect. The current tax laws recognize that small to medium business owners do not have Employment Insurance, maternity/paternity leave, paid sick days, limits on hours of work, are personally liable if the business fails, and need to save money for inevitable economic slow downs in order to remain in business employing people and contributing to the Canadian economy. The existing tax law recognizes that family members have to contribute to the business, usually unpaid. What farm kid didn't spend their summer working on the famiy farm instead of hanging out at the suburban mall?
Farmers are going to be hit particularly hard by these proposed measures. Fishermen even harder as they need to keep large reserves for the off season and just like farmers their families are a vital, often unpaid, contributor to the business. Want to give your son or daughter your fishing trawler, nets and dockage? They will be assessed tax on the transaction at a rate higher than if you sold to a complete stranger. The same is true if you are an engineer, doctor, small business owner, physiotherapist, the list of professions does not end in the eyes of the Finance Ministry.
If none of this sounds fair it's because it's not. Please send a postal letter or fax to your local Member of Parliament (MP's generally discount contacts by email). You can find your MP at this link. If you work for a small to medium business this will affect your greatly. It's not just the owners who will pay the price of this poorly thought out and ideology driven tax change, employees will suffer as well.
Marlene L. Grant CPA, CGA