Urgent action required to lobby against government and proposed federal tax changes
As many of you would no doubt have heard by now, a series of tax proposals has been issued by the federal government to radically change the way Canada taxes private corporations. Government has provided until October 2, 2017, a very short period of time for effected parties to provide their views on these proposals. Unfortunately, this is not a realistic time frame for proposals with such widespread implications.
What does this mean for PEI business?
While the public rhetoric has been that these proposals target the “wealthy” the reality is these proposals will have significant ramifications for ALL incorporated private businesses in Canada. As an example, our firm has prepared tax estimates for a typical business on Prince Edward Island: A business earning $100,000 per year and splitting the income with a spouse would see an increase in overall annual income tax paid of up to approximately $7,700 or about a 34% tax increase. This equates to almost $650 per month in additional income taxes! For a business on PEI making $50,000 per year and splitting the income with a spouse, the changes could result in an increase in overall annual income tax paid of up to approximately $2,700 or about a 27% tax increase. This equates to almost $225 per month in additional income taxes!
The effect of the proposed changes for a PEI corporation and its shareholders for passive income could reach an effective 74.55% tax rate. This is clearly unacceptable. We are hopeful the government would not have intended this tax result.
In addition, these changes are especially concerning for the farming and fishing sectors in particular. These industries are the backbone of the PEI economy and must be protected.
Our firm has issued a series of articles on how this may impact your business. If you have missed these please contact our offices. In addition, as a member firm of DFK Canada, MRSB has been actively analyzing the proposed legislation and working with industry groups and our fellow DFK member firms across Canada in an effort to lobby the federal government to amend or abandon these proposals.
What should you do now?
We realize that most private business owners are extremely busy trying to run their business operations and are not generally experienced or active lobbying government. However, this time is different and we strongly encourage you to speak up and make your voice heard. We have included a link to a proposed letter that you can sign and we propose you email to the following parties:
Thanks, any questions call or drop an email.
Terry G. Soloman, CPA, CA, TEP
Partner Tax Services
Direct line: (902) 629-1987
Fax: (902) 566-5633