Morneau’s tax changes will hurt those Liberals claim to help
Finance Minster Bill Morneau has released his plans to crack down on what the government calls “tax loopholes.” The victims in this are millions of Canadian small-business owners. The government views the lesser taxation on small business as unfair, and they wish to eliminate legislation that previous governments put in place to help small businesses grow and to help mitigate some of the much higher risk that entrepreneurs take on when starting a business. The result would be that even big business will be on the same playing field as small businesses. In specific, they’re looking at the practice of income sprinkling (where a family member receives a salary or dividend to reduce the business’ total tax burden); passive investment retention (where a owner’s investment that isn’t immediate reinvestment into the business); and income conversion to capital gains (declaring income in a lower tax form). There will be unintended collateral damage due to Morneau’s proposed changes.