The federal government has proposed significant changes to the tax system, in particular in terms of small business.
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The changes are meeting with significant opposition across the country.
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Those attending a Yorkton Chamber of Commerce luncheon last Thursday gained some added insights into what may be coming from Sarah Tkachuk, partner at KPMG based in Regina.
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The government plan is supposed to be designed to close loopholes the government has stated give a growing number of wealthy, small-business owners an unfair tax advantage over other Canadians.
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But Tkachuk said Thursday the changes go beyond creating fairness between the taxes business owners pay and those an employee might pay in similar circumstances.
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鈥淲e鈥檙e concerned how pervasive they are, or how far reaching they are,鈥� she said of the changes unveiled in July.
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The legislation which would enact the changes are still in the draft form, said Tkachuk.
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鈥淪o it hasn鈥檛 been passed into law yet,鈥� she said.
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The changes are now going through a public feedback, but the period is short, ending in mid-October, said Tkachuk, who added those wanting to voice their concerns have a limited time to contact members of Parliament.
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The changes focus on three areas of taxation, said Tkachuk; income splitting, conversion of capital gains into dividends, and how a business changes hands.
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In the case of income splitting Thachuk said the government concern is that family members being paid dividends receive 鈥渂etter tax rates than the employee would.鈥�
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While the changes are supposed to include a reasonability test to determine just how much labour a family member might contribute to a business, affecting the taxation rate, ultimately many family members in a business will pay more, said Tkachuk.
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鈥淰irtually all income splitting opportunities will be eliminated,鈥� she said.
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The changes would also change the taxes applied to business sales, in most cases disadvantaging the sale to family members, (intergenerational transfers), compared to a sale to a third party, explained Tkachuk.
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There are supposed to ways to 鈥渕itigate genuine intergenerational transfers,鈥� she said, but added the process would seem to be subjective in nature.
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The combination of changes is significant.
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Tkachuk termed it the biggest change in taxes in 45-years.
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Tkachuk said overall the 鈥渕ost significant concern鈥� for those work with tax policies day-to-day, is 鈥渢he complexity 鈥� and how subjective鈥� the changes will be.
As a result Tkachuk said groups across the country, led in large part by chambers of commerce, have been lobbying for changes to reduce the impact on Canadian small business.
