September 7, 2017 4:01 pm
Updated: September 8, 2017 2:50 pm

Regina business owners question planned federal tax changes

Changes are coming to the way small businesses pay their taxes. The federal government is examining loop holes they believe are costing them $250 million in lost tax revenue each year. But as David Baxter reports, this isn't sitting well with local business owners here at home.

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Gavin Semple has been with Brandt Industries since the beginning, when there were only 25 employees. Now chair of the Brandt Group of Companies, Semple is questioning why the federal government plans to change long-standing corporate tax rules.

“In a sense, the Trudeau government wants to tax all income in the business, not only the corporate income, but the after-tax income as well,” Semple said.

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The Trudeau government is looking to make changes to three ways small businesses are taxed. This includes the ability of incorporated business owners to divide income amongst family; a practice known as income sprinkling.

Another measure is limiting the ability of corporations to make passive investments in real estate or the stock market.

Finally, there will be a limit to a corporation’s ability to convert regular income into capital gains, which are taxed at a lower rate.

Semple said that limiting these measures reduces the amount of capital businesses have to expand. During his time in the company, Semple has seen Brandt grow to a company with around 2,000 employees.

“So it takes capital to create jobs, so it’s hard for us to understand why they would come out with an initiative that would have an adverse effect on employment,” he said.

READ MORE: Proposed federal tax changes anticipated to hit Saskatchewan farmers hard

Many questions linger on exactly what these changes will look like. This has Semple asking if Canada is still the right place to maintain Brandt’s headquarters.

“We’re looking at that alternative, we always look at it. But this kind of proposal by the federal government causes us to take a closer look,” Semple said.

Finance Minister Bill Morneau has said that closing these tax loopholes will benefit the middle class, by making people who make more money pay more tax.

Ottawa believes 50,000 families using these tax strategies costs the federal coffers $250 million annually.

READ MORE: Reality check: Will closing tax loopholes for the rich really help the middle class?

However, Hill School of Business instructor and certified professional accountant Randy Lipton said many middle class small business owners also use these strategies.

“They want to make it harder for businesses to qualify for [these benefits],” he said.

Lipton has around 100 small business clients, many of whom incorporated to be eligible for these tax benefits.

READ MORE: Small business owners angry about proposed Liberal tax changes

As a small business owner himself, Lipton also uses these tax strategies as a way of planning his financial future.

“So I’ve built my entire game plan for my career, or my business life based on that. Now you’re coming in 17 years and saying by the way we’re changing that,” he said.

The Canadian Federation of Independent Business (CFIB) delivered 14,691 petition letters from business owners to MPs Tuesday. The CFIB is also part of a 48 organization group called the Coalition from Small Business Tax Fairness.

CFIB vice president of Prairie and agri-buisness Marilyn Braun-Pollon and wants to see the government work more collaboratively with business.

“If we do need to look at addressing some of those shortcomings let’s do it, but they’re painting the millions of small business owners, hardworking small business owners with a very broad brush as being tax cheats,” she said.

The public comment period for this proposed legislation ends on October 2.

In Kelowna, BC, Prime Minister Justin Trudeau addressed the strong opposition Thursday morning. He voiced a willingness to re-examine the plan but fully intends on moving forward.

“We’re always open to better ways to fix that problem, but we are going to fix that problem,” Trudeau said.

With files from Monique Scotti and The Canadian Press

© 2017 Global News, a division of Corus Entertainment Inc.

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