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How The Liberal Tax Proposals Impact You

As many have heard, the Liberal government announced tax proposals on July 18, 2017, which they promote as “closing loopholes” and ensuring private corporations and their owners “pay their fair share”. If you’re not paying attention, or if you buy in to the Liberal propaganda, it would appear these proposals are only aimed at the very wealthy, and only those that appear to be tax cheats.

This is 100% NOT TRUE! These proposals are sweeping tax reform, which will fundamentally alter the taxation of Canadian small businesses. Their impact is not on the very wealthy, but the mechanic, the plumber, the farmer, and many of the local businesses that keep every town and city in Canada thriving and prosperous. And not on the tax cheats, but you and your neighbor, who have worked hard, taken significant risks, and paid your taxes along the way. I would venture to suggest, that if these rules are legislated as drafted, in one way or another, all Canadians would be affected, whether business owners or not.

By now I hope you’re asking, how does it impact me? I’ll tell you. It could be one, a few, or several, of this following list. And keep in mind, this is a small list of the possible implications.

1. You and your spouse own a business. One stays home and raises the children, and the other actively runs the business. If you both took dividends, the spouse at home may pay substantially more tax. This means less cash available in the business to expand, repay debt, hire employees, or worse, cover salaries, causing layoffs.
2. You retain extra cash in your corporation as a rainy day fund, to save for retirement, or to purchase a piece of equipment. The proposals want to apply a higher rate of tax on this cash, which reduces what you have available and extends your timeframe. So now your rainy day fund doesn’t last as long, or what you thought you had for retirement is less.
3. You own a farming company that was transferred to you by your parents, who also still own shares. They receive dividends on their shares each year to fund their retirement. If those dividends are unreasonable, your parents will pay tax on those dividends at the highest marginal rates, which could be 25% more than what they were paying. Either they survive on less, or you must come up with more.
4. You and your wife are in partnership operating a small business. One is more actively involved than the other. You both may be exposed to the highest rates of personal tax, even though you may only net $85,000 between the two of you. The highest rate in Saskatchewan is 48%. That’s doesn’t leave as much to pay for your every day life.
5. You pass away and leave your business to your child, or you plan to sell your business to a child or related person, maybe your brother who is in business with you. The proposals may eliminate the planning opportunities that existed to allow them to pick up where you left off, so to speak. Instead they will face a higher tax burden when attempting to liquidate the company, or to remove cash from the company to fund the debt they incurred to buy you out.
6. Your doctor, dentist, or optometrist is impacted by these rules, so they close their office and move to the US where they earn more and pay less tax, or they go work at the hospital as an employee. Now our essential services in rural centers begin to suffer and wait times for services get longer.
7. Your husband works for a local contractor, who treats him well and pays him a reasonable salary. The market stalls, and the local contractor’s workload has diminished. With less income, but more tax to pay, something must give. What if it’s your husband’s job?

If you are concerned about these proposals, and you should be, then please write to your MP, to Justin Trudeau, and to the Department of Finance. Consultation comments will be accepted until October 2. Email addresses are and Send it to both addresses.

If you have specific questions on how you or your business may be impacted, please contact our office to set up an appointment to discuss further at 306-384-4447.

Do you have unique business insights or expertise to share? Or maybe you are aware of new resources that would be useful to other Chamber members? If so, we’d love to hear from you!! “Share Your Knowledge” is an opportunity for our members to share information on their area of expertise with the membership. Participating in the blog is one of the many marketing & visibility opportunities exclusively available to Chamber members. Contact our office for more information.


Are you a business owner?

If your business is incorporated, then you could be facing a larger tax bill and big compliance costs from the government’s new proposals to change the way corporations are taxed. Here are three things you need to know about the tax changes proposed by the federal government:

1. Do you employ family members? The government wants to scrutinize their compensation to apply a much higher tax rate on income they consider “unreasonable”.

2. Do you invest the profits from your business? The federal government is proposing to tax that income at an effective rate of 70%.

3. Do you want to pass your business on to your children? Tough new rules make it difficult for younger kids to get the capital gains exemption. They could be doubletaxed.

Small and medium-sized businesses (SMEs) are the engine of the Canadian economy – estimates range from 85 to 90% of all businesses in Canada are SMEs.

The chamber network across Canada is using its collective voice on this issue; your voice as a business person needs to be heard as part of this initiative.

Send a message to your MP today. Government needs to know that this tax reform will harm businesses of all sizes.

Don’t know where to send the message to your Member of Parliament? Look up their address using your postal code at: MP by Postal Code.

For sample letter template: Federal Government Proposed Business Tax Change Letter

Saskatchewan Chamber of Commerce Issue in Focus Aug 2017 – Proposed Changes to the Taxation of Private Corporations in Canada

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