Fear and loathing on the tax change trail: Premier warns of unintended impacts

Fear and loathing on the tax change trail: Premier warns of unintended impacts

ST. JOHN'S, N.L. — Newfoundland and Labrador Premier Dwight Ball had a message Tuesday for Prime Minister Justin Trudeau and his cabinet: plans to end what the federal government calls unfair tax advantages for some wealthy small business owners could have "unintended consequences" that would hurt his province.

It's a concern that goes far and wide, Ball said.

"I've heard this from all provinces, I've heard it from small businesses, I've heard it from physicians throughout Newfoundland and Labrador."

His comments came as the federal cabinet met in St. John's to prepare for the resumption of Parliament next week.

Critics say drawing higher taxes from doctors could raise medical fees or make it tougher to attract them to rural areas.

"I want to make sure that we have enough physicians, enough health-care providers," Ball said. "We need to have those professionals available to us to deliver health-care services. We also need vibrant small businesses, companies that are strong to actually create employment throughout Newfoundland and Labrador."

The province has among the highest jobless rates in Canada.

The premier said he met one entrepreneur who mistakenly thinks her tax rate would jump 73 per cent under the changes put forward by Finance Minister Bill Morneau.

Morneau said he's battling misinformation and fear over who will be targeted. He said he'll contact the woman who spoke to the premier.

His three-pronged plan has sparked a backlash from doctors, lawyers, tax professionals, shopkeepers and others who've incorporated their small businesses in order to reduce their income tax bill.

Morneau is proposing to restrict the ability of incorporated business owners to lower their tax rate by sprinkling income to family members in lower tax brackets, even if those family members do no work for the business. He's also proposing to limit the use of private corporations to make passive investments in things like stocks or real estate and restrict the ability to convert a corporation's regular income into capital gains taxed at a lower rate.

Still, amid the objections from different groups, Morneau said there's also support.

The Canadian Labour Congress is among those who agree the tax system "has to work for everyone," he said.

Consultations have been going on across the country for almost two months and will end Oct. 2.

"Our sense is people are starting to understand our objectives," Morneau said, adding that he's willing to tweak the planned reforms based on the feedback.

"As we hear those things, we'll consider how we can best implement what we think are the best measures."

But Conservative Leader Andrew Scheer told the Regina Chamber of Commerce on Tuesday he believes it's no accident the consultations were held in summer.

"I'm very cynical about this. I believe that this was calculated, they brought these changes out when the House of Commons isn't sitting, the Opposition parties aren't there able to ask the question, the Finance committee isn't sitting," he said.

"This is way beyond the normal process for making fundamental changes."

Far from unintended consequences, Scheer said he thinks the Liberals know exactly what they're doing.

"I truly do believe it is that warped mentality that would rather see us all finish last together holding hands than see anybody succeed," he said.

"And the problem with that is, that type of mentality hurts the very people it claims to help."

The federal cabinet wraps up its two-day meeting in St. John's on Wednesday.

—With files from Stephanie Levitz.

Follow @suebailey on Twitter.

Sue Bailey, The Canadian Press