Regina's small business community reacts to proposed federal tax changes
The federal government's announcement about several changes to federal tax reforms on Monday prompted mixed reactions from Regina's business community.
Many Regina business people are encouraged by the reduction of the federal small business tax rate to 10 per cent on Jan. 1, 2018, and nine per cent on Jan. 1, 2019.
But, there are other tax package announcements slated to roll out this week, which has some business community members concerned.
"It's kind of put things on hold right now as for planning for our clients, going forward. It's created a lot of uncertainty as far as structuring and planning that we would normally do with them," said Laurie Hudema, tax partner and chartered professional accountant with Virtus Group in Regina.
Virtus Group helps about 4,000 clients across Western Canada with accounting and business advisory services.
Tax change timeline
In July, Finance Minister Bill Morneau launched a 75-day consultation period for three potential changes:
- The reduction of "income sprinkling," where business owners move a portion of income to family members through salary or dividends.
- The curbing of "passive investment income," which the government describes as the investment of money left in a corporation, for purposes other than to invest directly in growth.
- The conversion of a corporation's regular income into capital gains, which typically produces a lower tax rate.
This week the government will decide which changes stay in-place.
Tax tweak questions
While the Canadian Federation of Independent Business is pleased with the decision to reinstate the reduction of small business rate, it said more clarification is needed about other proposed changes.
"There's just a lot of unknown right now," said Marilyn Braun-Pollon, vice-president of CFIB. "While there is clarity around the package, we still have concerns that it won't recognize the formal and informal nature of a family-run business."
The CFIB is concerned changes to income sprinkling will not allow business ownership benefits for spouses who work around more flexible and family-centered schedules.
"We're anxiously awaiting the announcement about the remaining proposals."
A spectrum of affected people
According to the government, only those who earn more than $150,000 a year will be affected by proposed tax changes. While Hudema said most of her clients do not top out as high-earners, she said she expects nearly every one will feel the pinch in some way.
"It's created a huge concern on a lot of our clients," she said. "It's definitely impacting a lot more families than the wealthy few that they've been talking about," Hudema said.