Dear Mr Stanton,
As I am sure you are already very aware, the government's proposed tax changes, that have been painted as "closing loopholes for the rich", will severely impact the majority of small business corporations - of any size and wealth, including most of our business clients here in the Midland Penetanguishene area.
Small business owners take many risks, and already pay and administer a high load of tax when you take into effect payroll taxes, WSIB, higher property tax ….the list goes on. They also take on the administration of collecting and remitting taxes on behalf of the government. And now the government paints these entrepreneurs in a negative light and says they are unfairly taking advantage of loopholes.
I feel that the proposed rules to crack down on dividend sprinkling really need to be re-thought. The proposed rules, as they stand, would be a nightmare to administer as far as the reasonability tests proposed.
These rules would unnecessarily punish local doctors, who several years ago gave up rate increases with the province in order to be allowed to incorporate as a concession to the lower rates.
These rules will unfairly impact most small business corporations who may have one spouse not as involved in the day to day business, in order to raise children, and who generally is not eligible for E.I. maternity/paternity benefits.
These rules will greatly affect those small businesses that have relied on good years to put aside some funds to cover bad years. We don't know what the impact will be for clients who have sold their business and are left with the proceeds in their corporation to be used to fund their retirement. Will they now no longer be able to live out their retirement as planned or will the high proposed tax on passive investments gobble their retirement funds up? From information we have seen on the proposals, the tax on passive income in the corporation could be as high as 70%.
Perhaps instead of picking on small business owners and painting them as tax cheats, the government can look at the issue that top earners in Ontario are paying over 53% income tax on their marginal income. When you are giving more of your earnings to the government than what you are keeping, of course you will want to look for alternatives (including leaving the country).
Also many of the complicated tax "schemes" that the government is trying to subdue, are built around the fact that spouses can not share an income, due to spousal tax attribution rules. Why not look at allowing joint income tax filing for spouses (as is done in the US)? This would certainly make the playing field fair and simplify the tax system. It may have the effect as well as allowing one parent to possibly stay home to raise their children, instead of being penalized for staying home.
I wanted to take this opportunity to have my voice heard. I am sure you have heard from many other constituents and organizations in our community of North Simcoe, and hope you can take these concerns to the house of commons. We hope Mr. Morneau and Mr. Trudeau take the small business community's input seriously and re-think these ill conceived proposals.
Martin Kretzschmann CPA CA
Chartered Professional Accountants
373 Midland Ave, Midland ON L4R 3K8
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