“Punitive and destructive” federal tax changes would hit Alberta’s small businesses disproportionately hard, predicts a Red Deer tax lawyer.
Jason Stephan, a lawyer with CA Tax Law, urged small business owners at a Rotary Club meeting on Monday to bone up on a controversial new law that would “dramatically” increase taxation on up to 150,000 small Alberta businesses.
Small businesses need investment to grow — especially in the cost-heavy natural resources field, said Stephan.
Since many foreign investors are already being discouraged from investing in Alberta because of our provincial carbon tax, higher corporate tax rates on profits, and government pipeline policies, the door should be opened to more local investment in resource companies, he added.
But under the new tax changes proposed by the federal Liberal government, private businesses that invest in other private businesses would be levied up to a 70 per cent tax on profits. Where’s the incentive for them to invest and help other businesses grow? Stephan questioned.
“Essentially, they would be punished for investing in other businesses.”
Stephan urged concerned Rotary members at the Quality Inn, North Hill to write to the federal finance minister and to all three Alberta Liberal MPs with their concerns. He stressed that the window for public feedback is less than two weeks, since the proposal was introduced mid-summer and flew under the radar for many business owners.
The federal government laid out a three-part plan to eliminate what Ottawa calls tax loop holes for wealthy small business owners. This seems good, said Stephan. But the government’s definition of “fair” is highly selective, added the lawyer, who spoke at the meeting along with Aina Potts, a business advisor with MNP Tax Services.
Stephan feels Prime Minister Justin Trudeau was badly advised.
Included in the proposal are measures limiting the use of private corporations to make passive investments in stocks or real estate and limiting a corporation’s ability to convert income to capital gains. (Capital gains are usually taxed at a lower level, which has been referred to as a “income-sprinkling” loophole). There are also measures to impede business owners from transferring corporations to family members.
Some business owners are concerned about this impacting the inter-generational transfers of businesses, making it more attractive to sell a business to strangers than their children.
Local commercial realtor Glenn Moore said the government should be helping small business owners create employment to keep Canada’s economic engine humming. The changes proposed appear to do the opposite, he added.