New Tax Changes Proposed by Trudeau Government

 

The new tax changes proposed by the Trudeau government to construct, what it cal

... ls “unfair” loopholes in the existing...
New Tax Changes Proposed by Trudeau Government
Manish Khanna Image
Manish Khanna
Wednesday 20th of September 2017
News

The new tax changes proposed by the Trudeau government to construct, what it calls “unfair” loopholes in the existing structure allowing the affluent Canadians like doctors and businessmen to trim down the amount of tax to be paid, has been received with a lot of commotion and chaos.

The conservatives and critics see this as a controversial plan of the liberals to invade on the rights of small businessmen. The reaction from the businessmen as well as the professionals like doctors, accountants, lawyers and others, has determined that it would not be a smooth sail for the liberals to get the sanctioning disposition this fall.

However, Prime Minister Justin Trudeau has defended the prospective tax modifications and rebuffed the criticism of the plan, contending that he would not apologise for his obligation to righteousness.

Finance minister Bill Morneau also backed him by stating that the tax reforms projected by the government are clearly about preparing the affluent to pay their share of taxes.

Trudeau government has also left room for making the required changes in the plan by introducing a consultation period of 75 days, ending on October 2, let people analyse the tricky proposition and contribute to an assessment of adjustments to be made.

In words of the Prime Minister, “I hear feedback from Canadians that want to ensure that this does help the middle class…. I’m happy to have discussions and feedback from interested Canadians who want to make our tax code fairer, and we’re going to take all of those reflections into account.”

As was expected by the Finance minister Bill Morneau, denunciation has grown, giving a clear signal that the critics are up for a tough fight. Where the Liberal MPs have asked him to twist the small-business tax change, the small business owners are protesting against being targeted unfairly.

The opposition is contending the proposed changes which target the tax benefits enjoyed by Canada’s economically significant business sector. They added that the current tax module is imperative for the growth and safety of small-businessman, who are always at a financial risk while opening a business concern.

The resentment is headed by an allied group of nearly 45 industry associations, tax men, engineers, doctors and government’s conservative rivals.

The centre of all the opposition is the three-part plan of the government to eradicate loopholes in the present system.

The Three-Part Plan

The first section of the potential three-part plan suggests eliminating the system that facilitates business owners to misuse their enterprise to sprinkle some of their income to other members of the family, who have to pay lower individual taxes, even if they are not a part of business operations. It is estimated that addressing this issue of shifting income would add a whopping $250 million as revenue every year.

The second change would restrict the application of private associations to make a passive investment in real estate or stock. The proposed modification will ensure that the taxes on these investments inside a company are evaluated in the same way as the external ones.

The third proposed change would restrict the alteration of company’s formal income with the capital gains that are taxable at lower rates.

While the opponents are characterising the changes as a cash grab, Liberals maintain that they are up to creating an equitable system. “We’re doing more for the people who need it, and less for the people who don’t. That’s the commitment we made to Canadians and will continue to make to Canadians,” said the Prime Minister.

The rising animosity over the prospective changes has created concerns in the Liberal caucus. Many Liberals also foresee the proposals as a major topic of discussion at the caucus retreat in Kelowna, B.C.

Finance minister Bill Morneau called a conference to comfort the Liberal backend, who are at unrest after complaints the proposition flooded their riding office. He addressed the apprehensions of his associates and provided them with strategies to counter the prevalent misinformation about the plan. He also assured them that the government is ready for adjusting the proposals to avoid any unintentional consequences.

Morneau also held a conference with journalists to counter the commotion; but the experts in tax laws, who have thoroughly studied the proposals, have raised serious concerns.

Joel Cohen, director of Cohen Sanderson Inc. in Toronto, has termed the proposed policy as “very very foolish” adding that it was “rushed through” and “poorly conceived”. He also made it clear that he has discussed the document, and there was no room for misunderstanding.

He said, "It was headed by officials who have never invested in the business and have no concept of what it's like to pay the rent, to have employees, get that next sale and have all this exposure; without knowing what the next day is going to be like."

Analysing it further, he debated that entrepreneurs don’t enjoy the same security and stability as people who are employed, like pension plans, benefits from division plans or vacations. Not only the small businessmen take risks in starting a new venture, but also they are family activities and thus making it a “risk for family”.

Adding further, he said that the passive investment portfolio provides small time businesspeople with security in the form of retirement savings, which they otherwise don’t enjoy. "It will severely damage entrepreneurship in Canada. That's not okay for anyone," said Cohen.

“Huge” battle warning by the conservatives

Lisa Raitt, deputy leader of the conservatives, indicated that the fall parliamentary session would see a “huge” controversy over tax reforms. After holding meetings and conferences on the proposed changes all over the country, Raitt said that there should be protracted and more structured deliberation to deal with the issue.

With the rising pressure on the government, Morneau went on Twitter to counter the criticism. He assured everyone, "We're consulting about closing unfair loopholes. We will NOT raise taxes on small business".

Kevin Milligan, who is a University of British Columbia economist and has been on advisory board for tax reforms, said that he favoured in keeping the entrepreneurs in the same line as anyone else when it comes to taxes.

Milligan also signalled that there is room for improvement in the proposed changes in his statement, "I'm really happy that they've set up this period of consultation. And the reason is, when you get into writing the legislation, that's a tricky thing,"

Author Info
Manish Khanna

Manish is founder of Business2sell Group of Websites. 

Business2Sell.com.au is one of the leading business and franchise for sale listing websites. We work with our business brokers, commercial agents, franchisors and private sellers to help them connect with the right buyers for their opportunities. 

With website now functional in Australia, United States, United Kingdom, Canada, New Zealand and South Africa. We have over 18,000 businesses for sale listed, with over 220 Business Broker and Commercial Agent. 

I have over 20 years of experience in Web Industry; I have been involved in websites industry since the early years of 1996-97. In my professional career I may have worked for over 10,000+ websites. My Specialty is to build portals or complex online applications.

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