Business people skewer Liberals' plan for tax fairness
Small business operators who spoke at a consultation meeting
were almost universally opposed to the federal Liberals’ plan for tax fairness.
The meeting took place Tuesday (Sept. 12) in Langley City, and was hosted by Cloverdale-Langley
City MP John Aldag.
The Liberal MP said his office has had more correspondence
on this topic than any other since he was first elected two years ago. In
response to a question from Greater Langley Chamber of Commerce director Jenny Hinch, he said responses to
the letters he has received will start going out tomorrow. He had been waiting
for a Liberal caucus meeting, which took place last week in Kelowna, before
responding, as he knew the issue would be an important one of the agenda there.
He also urges anyone wanting to speak about the proposals to send responses to fin.consultation.fin@canada.ca.
He asked that people sending responses send him a copy of their submissions as
well.
Aldag said notes of what was said will be compiled and he will
take those concerns to Finance Minister Bill Morneau. Challenged on how
meaningful consultation was, given that both Morneau and Prime Minister Justin
Trudeau said in Kelowna that changes to the tax system are going ahead, he was
careful to point out that neither endorsed the specific proposals which have fueled
outrage from many sectors of the business community.
Aldag said his own family is affected by the proposals, as his
wife is a physician who has incorporated her business. They have already talked
to their accountant about what these changes could mean.
He also apologized for the language that has been used by
some Liberals about the proposals. They have used words such as loopholes, tax
avoidance and cheats.
“Some inflammatory comments were made in communications
about these proposals. Business people have abided by the rules and it’s
offensive to say people are not paying their fair share. We need to get this right.”
He pointed out that there have been a lot of incorporations
since 2000and the tax system has not changed substantially since 1972. The government is looking at levelling the playing
field so that people who incorporate do not pay substantially less tax than
those with jobs who make similar incomes.
Tamara Jansen, who owns Darvonda Nurseries with her husband,
handed out a sheet listing what benefits working people have and business
owners do not have, such as paid vacations, maternity leave and pensions. They
started in business 30 years ago, taking over from her husband’s parents. The
first year, they lost $30,000 on sales of $200,000. In 2005, they were hit with
a devastating crop loss which cost them $500,000. There was no compensation for
them from government, unlike the poultry industry that was hit with the Asian
flu around the same time.
She said businesses have to have rainy day funds for such
likelihoods, and often that is in the form of investments which are held within
the business. The government is targeting such investments, which are also often
used as working capital.
The government is also targeting income sprinkling, where
family members who hold shares get dividends. Aldag said these dividends often
go to young people in the family, who may be going to university, and he said
they may be receiving an unfair advantage. Jansen pointed out that her five children
worked in the business from the time they were young and this is their reward
for doing so.
She also questioned proposed changes to capital gains within
a business, saying it may mean her son cannot take over the farm due to the
huge amount the government wants paid when a business is passed to the next
generation. This will devastate farming industry, she said.
She said her business has grown to have 200 employees and is
a significant exporter. These changes put its growth in jeopardy.
“These are not solutions,” she said.
Several accountants attended. One said the changes are good
for his profession, but not for businesses, because of their complexity.
Another said that in 2008-09’s recession, many construction companies did not pay
their subcontractors, and he had bad debts of 30 per cent of his billings. He
said that is the reality of business, and some of those people are still his
clients because they made it through.
Several people asked what the logic is of looking for more
taxation. They said the government needs to look at its spending, not bringing
in more revenue. Dean Drysdale, Conservative candidate in the riding in 2015,
said that some business people simply won’t work as much because of the additional
tax they would owe.
As a director of the Greater Langley Chamber of
Commerce, I stated that it represents almost 1,000 businesses, many of them small
businesses owned by entrepreneurs. I emphasized that the chamber fully backs the position
of the Canadian Chamber of Commerce about the fundamental unfairness of the
proposals.
Speaking on my own behalf, I said the proposals should be
withdrawn and there should be proper consultation on true tax fairness –
including comparison of the value of pensions for those with good defined
benefit plans which are indexed, and the pensions that other working people and
business people will receive. Many small business people structure their businesses
in order to have retirement income, and some will be punished for doing so,
although they were only following the rules that were set out.
Aldag said the government had planned to include the changes
in the 2018 budget, but there is no reason it cannot consult for a longer
period and more broadly. Many speakers criticized the consultation process as being
too short, and at a bad time of the year.
The proposals will have many unintended consequences, with
some speakers suggesting it could lead to an exodus of doctors and others
saying businesses will close or scale back their operations, and hire fewer people.
Notary Lilian Cazacu, who grew up in the Soviet Union, said
the proposals have a whiff of the way taxes were collected there. He said they do
not encourage business people to work hard and grow their businesses. He said consultation
needs to involve entrepreneurs and accountants, and “fairness can’t be achieved
with a blanket solution.”
Several young people who have started businesses expressed
deep concern, saying these proposals make them question whether they should continue
to pursue their dreams. One young realtor said that, if these had been in place
when he started out, he never would have worked as hard as he has. Rudy Storteboom
said realtors are deeply concerned about the proposals.
“This discourages me and a lot of young people,” said a
young woman who brought her baby to the meeting. “There are people like me who
want to succeed in small business. What is the point?”
One man said his wife is an accountant and he takes care of
their children during tax season, when she is very busy. He said he contributes
to her business by doing so, because otherwise she would not be able to work as
hard as she does. He said that is what sprinkling is intended for.
One speaker said the U.S. may change its tax rules and make
it more attractive for business people to operate from there. If the proposals
are in place, there will be an exodus, he predicted.
Angie Quaale pointed out that it is hard for small business
people to borrow money from banks, and that’s why they need to be able to
access capital from their businesses. She said that, as a single woman, banks
were not ready to loan her money. She said many business people have a strong
degree of cynicism about how meaningful the consultations truly are.
“I’m happy to pay more than my share (of taxes),” she said. “However,
this is a spending issue. If the federal government had to operate like a business,
we wouldn’t be having this conversation. They need to be living within their
means. Passive investments (one of the targets) may lead to higher wealth, but
they may also lead to bankruptcy.”
One woman who entered the meeting late said she had never
heard of tax sprinkling and believed that people should pay a fair share of
taxation.
Aldag summed up at the end of the meeting by saying that he
had heard the changes could lead to unintended consequences, the consultation
period was rushed and poorly timed and the proposed changes “are not a win for
business.”
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