Small Businesses Under Attack!!!

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 BIG stuff happening in the Tax World.This morning I sat with about 50 colleagues discussing some BIG stuff that’s happening in the Tax World. Why? Because I believe in advocating for small business. I believe we should all pay tax but I also believe it should be reasonable and fair. I believe I have an educated voice when it comes to small business, accounting and taxes and therefore need to speak up and stand up for small business owners and taxpayers, in general. So today, we got together to address some BIG issues that have come our way.

On July 18, 2017 the Federal Liberal Government released proposed tax changes for private corporations. They provided a 75 day consultation period for taxpayers to provide feedback. These changes are massive and affect ALL small businesses. They are claiming they want the rules to be FAIR and want to close LOOPHOLES. The proposed changes are not FAIR. And the so-called LOOPHOLES that they are proposing to change were allowed under the tax act and put in place by previous governments; they were not LOOPHOLES.

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  • The changes proposed will affect your ability to split income with your spouse and/or adult children.
  • It will affect your ability to invest within your corporation to save for the future and/or retirement.
  • The changes are retroactive.
  • It will affect your ability to grow your business, to hire new employees, to retain existing employees…the list is endless.

What is not FAIR are the small business owners being targeted. Small business owners do not have a guaranteed salary and are often paying employees before themselves. Small business owners are investing all their money back into their companies to enable it to grow. Small business owners do not have job security. Small business owners do not have pension plans. Small business owners do not have stat holidays or benefits. Small business owners do not have access to financing and often put their homes up as collateral.

The majority of Canada’s economy is made up of small businesses. As a small business owner myself and a Chartered Professional Accountant specializing in Small Business, I understand the extreme effect this will have on Canada, all small businesses and employees of small business. These changes are NOT good.

These changes will affect doctors, lawyers, dentists, accountants, electricians, plumbers, construction…they will affect EVERY small business in Canada. They will also affect employees of small business in Canada.

So I come to you…as a Small Business Owner. As Your Trusted Accountant (or will be one day ;)) and Tax Advisor. Every voice needs to be heard. There are two things I ask:

  1. SIGN A PETITION!!! These changes only allow for 75 day consultation period. This started in the summer when fisherman, farmers and construction companies are at their all time busiest and no time to read or follow-up on these changes. Accountants and the financial industry were on vacation. These rules were brought out at a time when no one was paying attention…or at least they hoped no one was paying attention. The Tax Experts and Professionals need more time to comprehend and evaluate the extent that these proposals will have on ALL Canadians. Please sign the petition to extend the consultation period.
  2. Write your local MP a letter. Send it to Prime Minister Trudeau and Minister Morneau too. A template, courtesy of the Tri-Cities Chamber of Commerce, is below under Appendix B. Feel free to copy and paste or modify to your personal situation.
  3. A bonus request…if you want to send me a story of how this will impact you and your family, I would be happy to send it with CPA Canada’s official response too. We believe it is important for the Federal Liberal Government to hear from you directly but we will also be sending from all CPA’s across Canada.

I have included additional resources under Appendix A but if you follow me on LinkedIn, you will see many, many more.

If you think this won’t affect you, you are mistaken. EVERYONE in Canada will be impacted. Please use your voice too.

Appendix A: Additional Resources

https://www.linkedin.com/pulse/business-owners-fair-share-hugh-neilson-fcpa-fca-tep

http://www.mindengross.com/resources/news-events/2017/08/02/is-a-93-tax-rate-fair-to-canadian-small-business-owners

http://www.fin.gc.ca/activty/consult/tppc-pfsp-eng.pdf

http://business.financialpost.com/personal-finance/taxes/a-93-per-cent-tax-rate-private-corporation-tax-could-make-it-possible

Appendix B: Template

Dear Prime Minister Trudeau, Minister Morneau, and MP (Insert Name),

I’m writing you as a concerned citizen and small business owner. Your proposed changes to increase the tax burden on small business will have wide ranging negative effects on the Canadian entrepreneurial spirit and our nation’s overall economy. The government’s accusation in the media that claim small business owners aren’t paying our fair share of tax is unfounded and untrue.

I’ve been hearing from leaders in my own community. They are upset that the Government of Canada is punishing hard working business people – people who are drivers of our national economy. You are vilifying small business owners and the proposed changes will separate them from the same middle class your party vowed to protect for during the last federal election.

Small business owners are the backbone of the Canadian economy, attributing to roughly 30% of the GDP in this country. We work hard in our businesses. Many of us are sole proprietors – electricians, plumbers, media consultants, digital start-ups etc. Many of us work 60-80+ hours to provide for our employees, their families as well as ours. In fact, we are obligated to take care of everyone else before our own families. Many of us risk our livelihoods on a daily business, and have gone without a paycheque for many months during a downturn.

Your government is claiming that it is “being fair” to tax private corporations. In the media, you claim that we small business owners are not paying our fair share, and that income to employees and employers are the same. This couldn’t be farther from the truth.

Below is a list of benefits that employees are afforded that employers do not receive.

Employees benefit from having:

  • A guaranteed salary
  • ob security or workplace accommodation
  • Having Employment Insurance (EI) coverage
  • Canada Pension Plan (CPP) coverage
  • A regular workweek of 35-40 hours
  • Overtime pay
  • Paid holidays
  • Paid parental/maternity leave
  • Paid bereavement leave
  • Extended health, dental or insurance benefits
  • Employer matching retirement program
  • Statutory holidays

On top of this, small business owners have to contend with other aspects.

We must personally guarantee company/business debt. Should we require additional employees for completing our work, we are personally liable for:

  • guaranteeing employees have a steady and reliable minimum income
  • covering 58 per cent of employees EI cost
  • covering 50 per cent of employees CPP cost
  • meeting all statutory labour requirements for work hours, overtime hours and pay, holiday leave and pay, statutory holidays and parental/maternity leave.
  • accommodating employees for any limitation preventing them from completing the work they are providing
  • damages should we no longer require their assistance

The government is saying that this move will make it “more fair” for all Canadians. So, if we’re talking about making things “more fair” for all Canadians, will small business owners receive these above mentioned benefits?

And unlike large corporations, we don’t have a public market to raise more equity. By having private corporations, we shield ourselves from potential economic downturns and legal liability issues. It is also a way for small business owners to save up for re-investment into our business ventures, which will in turn stimulate the Canadian economy as a whole.

Additionally, the funds we hold in our private corporations are our savings for future use. As mentioned above, we don’t have pensions like employees or MPs. Most of us will never be in a position to have a pension. A private corporation is our way of saving for retirement. Having vehicles to invest in while the funds are in our private corporations makes sense due to inflationary conditions. Any income we generate already gets taxed at the highest rate, so why do we need to be taxed us anymore than that? When we eventually take out the funds to use, we still pay tax as well. So I fail to see the point in this exercise.

The proposal to increase the taxation of investments inside a private corporation discourages savings in small businesses for future business investment. These proposals will slow down investment in small businesses, and will have a negative trickle down effect in the supply chain (including employees, suppliers and other related businesses). I worry that the impact on the Canadian economy will be significant. Will these changes deter future generations of entrepreneurs from starting their businesses in Canada? Or will they be so discouraged that they will altogether not start business at all?

In conclusion, I ask that you please withdraw these proposals. These proposals will hurt small business and the Canadian economy.

SIGN YOUR NAME