The Honourable Bill Morneau

Minister of Finance

Finance Canada

90 Elgin

Ottawa, ON K1A 0G5

Proposed Tax Changes

I am the owner of a private corporation in British Columbia, and am writing to express my deep concern with the proposed new tax rules introduced by the Liberal government on July 18, 2017.

For many years, it has been government policy to encourage the formation of small business, supported by certain tax rules that helped to stimulate the growth of small business and as such the growth of the Canadian economy. These are not “loopholes”, but reflect the fact that an owner of a business has taken on risk, foregone benefits that are available to many employees (including government employees), and created jobs that have been a major stimulator of the Canadian economy.

A comparison of some of the benefits that employees receive, which a business owner does not, includes:

  • Severance pay and Employment insurance
  • Sick days
  • Statutory vacation
  • Employee benefits
  • Pensions
  • Stock options
  • Union representation

Business owners take significant risks that are not incurred by an employee, such as:

  • Using their home as security to get business loans
  • Taking little or no income in the first few years.
  • Risking bankruptcy if the business fails, both for the business, and potentially for the owner and other family members who may be guarantors of loans
  • Being personally responsible for unpaid payroll and GST/HST tax
  • Have to navigate through government and large business red tape
  • Not knowing whether there will be enough cash, and consequently foregoing income so that they can pay their employees and creditors.
  • Dealing with bankers who put extreme pressure on owners who do not meet their covenants or are late with a loan repayment
  • Investing everything they have to start a business, with no safety net in the event of failure of the business
  • Managing the cyclical nature of business

The above benefits and risks are all costs (monetary or non-monetary) to the small business owner that the government has failed to acknowledge in drafting their new punitive tax rules. It appears that government has targeted small business owners in a supposed attempt to create fairness in the tax system. But at what cost? The government claims these new rules will generate about $250 million in additional tax revenue, but experts predict that the cost of administrating and defending the new highly complicated and complex rules to far exceed the tax revenue, so how can this be a positive for the Canadian economy and the Canadian people?

Only one in three small businesses actually survive the first three years and nearly every failed business results in extreme family hardship.

“Small business” remain the largest employer in Canada and many of these tax rules will cause financial hardship and will harm our economy as owners realize that it may no longer make sense to take on these risks given how much more tax they are being asked to pay.

I oppose the proposed changes in the tax structure for incorporated businesses and agree with many others that these changes DO NOT get implemented in the Canadian tax system.

Sincerely,