Federal tax changes

About the policy

In July 2017, Finance Canada announced some of the most sweeping changes to the business tax laws seen in decades—a set of three major tax changes and increases for small business:

  • Limiting income-splitting.
  • Higher tax rate on passive investments.
  • Limiting the conversion of regular income into capital gains.

The government framed these practices as tax evasions, or “loopholes.” They suggested that some – specifically the “very wealthy or the highest income earners” – were using private corporations to avoid “paying their fair share” of taxes, or to gain a tax advantage.

While the government had suggested that these changes were targeted to close tax loopholes aimed at the wealthy one-percenters, the truth is that the proposals will affect many business owners that are firmly rooted in the middle class.

Data collected from Statistics Canada, and other official government sources, showed that two thirds of small business owners earn less than $73,000 per year and half of those earn less than $33,000. We have heard from tax experts that many higher income individuals do not use these relatively simple tax planning strategies.

What we are doing

The original federal tax changes announced in July 2017 would’ve been a big hit to business competitiveness. We made it our mission to advocate on behalf of your business to ensure the Government of Canada understood the consequences of the proposed measures.

Our advocacy efforts included: working to extend the consultation around these changes, making sure the government understood the negative impact they would have on many legitimate small businesses, and strongly encouraging them to rethink the taxes altogether.

During Small Business Week 2017, the Government of Canada announced updates to scale back the tax changes originally proposed. Though these new measures represent steps in the right direction, they don’t address all of the flaws in the original proposals or in our complex tax system.