Proposed federal tax changes would be punitive and unfair, according to a tax lawyer who spoke with Red Deer constituents.
Jason Stephan, a lawyer with Central Alberta Tax Law in Red Deer, joined Graham Heron, a business advisor with MNP to discuss the technical aspects of a controversial plan to close what the Liberal government calls loopholes.
“Even if you accept the government’s argument that it is unfair, this is unwise,” said Stephan.
About 100 people packed into a meeting room to hear from Earl Dreeshen, Red Deer-Mountain View MP, and two local tax experts to discuss the proposed changes at the Red Deer Sheraton on Tuesday.
The federal government has laid out a three-part plan to eliminate what they say are tax loopholes. These include changes to prevent small-business owners from using their corporations to family members who are taxed at a lower rate; limit the use of private corporations to make passive investments in stocks or real estate; and limit a corporations ability to convert income into capital gains. Capital gains are typically taxed at a lower rate. It has referred to these loopholes as “income-sprinkling.”
The changes target wealthy small-business owners who have an unfair tax advantage, according to they government. These changes could net $250 million in federal government revenue.
A measure included in the proposed changes Dreeshen took exception to was how it would impact intergenerational transfer of a business.
“Most of those guys are out on the combines right now,” he said.
Some of the changes could encourage farmers to sell their land to neighbours or strangers rather than their own children. Heron said the changes were “absurdly complex,” and it would make selling to family is the worst option under these rules.
Dreeshen also raised a point that, should these changes go ahead many business owners will have to restructure much of their business, savings and retirement plans.
“You want to be out there to run your business and doing the thing you’re required, not working with your tax lawyers and accountants,” said Dreeshen.
“I always say phone your MP, but phone some of the MPs from some of the other political parties to put pressure on them. It’s starting to be a country-wide issue,” said Dreeshen.
The proposed changes are open to public comments until Oct. 2. For more information visit www.fin.gc.ca.