The Greater Vancouver Board of Trade (GVBOT) is applauding new moves by the federal Liberal government to cut taxes on small businesses, but says the government has still missed the mark.
Earlier on Monday, the Trudeau government announced that Ottawa would cut small business taxes from the current 10.5 per cent down to nine per cent by 2019.
GVBOT president Iain Black said it is always good news to see taxes lowered, though he says Canadian small businesses are still noncompetitive compared to many American jurisdictions where the rate is around five per cent.
But he said the bigger problem is that Monday’s changes have failed to address the main concerns of the small business community.
“The small business tax was never the issue with respect to the millions of Canadians who have spoken up about the changes that have been proposed vis-a-vis small business taxation and entrepreneurial ventures in this country,” Black said.
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Black said he is particularly concerned that the new changes do not address concerns about the taxation of “passive income.”
That term refers to money that a business has saved in banks, stocks or other investments.
In other words, it’s “that magic occasion where you make some profit as a small business owner, and you’re hanging on to that money within the business so that you can reinvest it back into the growth of the business or by hiring more people,” Black explained.
Monday’s changes leave that income vulnerable to higher tax rates, Black said.
Black said new changes to the lifetime capital gains tax, designed to protect farmers and family businesses, also fail to help small businesses because most of them don’t last longer than 15 years.
He said Ottawa owes the B.C. business community more consultation, arguing that two and a half months of engagement launched in the “dog days of summer” aren’t enough.
B.C.’s small business minister Bruce Ralston, however, says he’s pleased at what he sees coming from Ottawa.
“Certainly I think small business has done a very good job on speaking on its own behalf, and I think the federal minister seems seized with that issue,” he said.
Ralston said he’s pleased to see Ottawa following B.C. in lowering the small business tax rate. The previous BC Liberal government slashed the provincial rate from 2.5 per cent to two per cent.
Doctors, lawyers, accountants, shop owners, farmers, premiers and even some Liberal backbenchers have denounced the Liberals’ proposed tax reforms, arguing they will hurt the middle class.
The Trudeau government says the reforms are needed to stop wealthy individuals from incorporating small businesses in order to get an unfair tax advantage.
More changes to the government’s tax proposals are expected later this week.
-With files from Liza Yuzda and the Canadian Press