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Poll Comment of the Month: Canadians Betrayed by Tax Proposals

Posted: September 01, 2017 VIA: Knowledge Bureau
Posted in: Strategic Thinking, Federal Government, DAC, capital gains, taxation, knowledge bureau, Evelyn Jacks, income tax, Small Business, distinguished advisor conference, Canadian economy, inflation, tax changes, tax reform, tax rates, entrepreneur, tax proposals, passive investment income tax, Knowledge Bureau poll, Liberal government, layoffs, private corporation, proprietorship, Larry Frostiak, CE Summit, Knowledge Bureau CE Summit, Knowledge Bureau Distinguished Advisor Workshops

We received dozens of thoughtful, well-crafted comments to our August poll on the proposals to tax passive investment income inside a small business corporation at top personal rates. But this “Letter to the Government” submitted by Brad is a must-read.

Here it is, in its entirety:


I’m writing to you to express my extreme disappointment regarding the federal tax proposals. These proposals are about as short-sighted and mean-spirited as anything I have seen from any level of government.

Your consultation period is simply a poor joke, 75 days during the summer when parliament isn’t sitting and many people are away on vacation. The briefness and timing of this consultation period tells me that your government is trying to avoid any actual consultation, and push this through with as minimal discussion as possible. These proposals are so wide-reaching and impacting all Canadians regardless of income level, that at a minimum this consultation period must be extended to give sufficient time for discussion.

The rhetoric from your government is appalling. Using the terms such as “loophole” and “crackdown” is done for no other purpose than to turn the public against people who have been honest and law-abiding taxpayers. The current rules were brought in decades ago specifically with these intentions in mind, they are not “loopholes.”

These proposals will have a crippling effect on small business owners and professionals, as the tax rates will skyrocket. Many small businesses fail, having borrowed heavily to start, and need these tax rules to allow them to survive long enough to become profitable. Professionals typically graduate with hundreds of thousands in student loans. Why would anyone take the risk of starting a business and putting their financial lives at risk if they’re just going to have it all taxed away?

In my practice I meet with many medical professionals, young and old, many of whom tell me they feel betrayed by your government. They are asking serious questions about moving to the States, working less, or retiring earlier. So while the government is telling the public that these proposals will only affect the wealthy, what happens to the staff that these professionals have or would have hired if the professional decides they’ve had enough of working in such a draconian tax regime? There will be layoffs and reduced hours for office staff, or no jobs and taxes ever created if the young professionals decide to move. These professionals are not coming to me with idle speculation, they are quite serious in wanting to know what it would be like to work just south of the border.

I would like to request a meeting, in person, to discuss these proposals. If these proposals go through as is with such minimal consultation, not only will I be actively supporting your opponent in the next federal election, but will encourage my clients, family, and friends to do so as well.

By Brad on August 30, 2017

We'd like to thank Brad and all of you who took the time to comment on our August Poll. The September Poll is now online.

Want to learn more about these and other tax proposals, and how to best serve your clients?

Follow Knowledge Bureau’s commentary in KBR and on LinkedIn, Twitter and Facebook, take an online course, or register for our November CE Summit — which will cover the new regime of taxation for private corporations, post-October 2 — the deadline for submissions on the federal government’s proposals.

At the Summit, Larry Frostiak, FCA, CFP, TEP, will present calculations of active and passive integration models and recommendations to minimize tax. In particular, case study examples will be presented to illustrate the concepts and set out the implications for existing corporate structures with a look at the “before,” the “after” and the “now.” Discussions will cover whether a new “V-Day” will become relevant, with corporate valuations designed to crystalize existing fair market value due to proposed capital gains exemption changes. Implications on a go-forward basis will be examined, as will the tax issues with respect to the existing value within the private corporation.

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