The federal government is moving to make some of the most radical changes to corporate taxation since 1972, and many Sudbury businesses are saying it is too fast, too soon and even punitive.
To help small business owners and entrepreneurs better understand what these changes could mean, and how they can have the federal government hear their concerns, the Greater Sudbury Chamber of Commerce held a panel discussion and luncheon on Oct. 16. Chamber members were in agreement on many fronts: the changes paint businesses as tax cheats, greedy and need to be taxed more heavily.
On the panel was R. Geoffrey Fisher, tax partner at KPMG LLP; Cleo Melanson, partner at Freelandt Caldwell Reilly Chartered Professional Accountants; and Chris Laking, CPA and president of Laking Group of Companies.
As a business owner and accountant, Laking was blunt about what these changes would mean for himself and other business owners.
“These tax changes are punitive to small business,” said Laking in an interview. “Growth is going to be stumped by these changes. They are talking about taxing the wealthy one per cent, but this is hitting everybody, even the small restauranteur and larger companies.
“It's going to be more difficult to operate and create any kind of wealth from growth.”
Laking said getting information out there is the most important part of these meetings right now to let people know how these tax changes will affect them, as the underpinnings of businesses large and small.
“These changes will affect any owner-managed business," he said. “These changes have come through very quickly. The consultations, from my perspective, have been limited in scope, but there has been significant response.”
There have been many meetings across the nation over these changes at business chambers. Some progress has been made, with the federal government recently pledging to cut the business tax rate to nine per cent after a backlash and also backing off a proposal to tax employee discounts after significant pushback.
Much of the confusion stemmed from the original understanding that the proposals were released over the summer would only be aimed at the wealthiest corporations. Now many are concerned that those same changes are being aimed at everyone, from small business to individual professionals like doctors and lawyers.
There were more complaints the federal government didn't give the public enough time for consultations, July 18 to Oct. 2 around 75 days.
Among the chief concerns are:
- If a business employs a spouse or family member the business owner will have to prove their wages are “reasonable,” without considering their other roles in the business, including caring for other family members and children.
- Changes to succession planning, affecting how owners can sell their business or determine who can take over, such as children, spouses or other partners.
- Changes to how income entrepreneurs and owners collect from their businesses is taxed.
Melanson said business owners are very upset, especially at being compared to employees, calling it unfair to just focus on certain aspects of their business models, as well as being viewed as “tax cheats.”
Even though the changes are still in proposal stage, there is a lot of concern over the majority Liberal federal government pushing changes though with little opposition or concern for what business owners are trying to tell them.
“There's a lot of uncertainty, in terms of this pretty big tax reform rolled out in the middle of the summer. Some people are just now finding out what this could mean.”
He added it was too bad the consultation period had closed so soon and was held over the summer, when many were probably taking vacations.
It will hit family-run businesses especially hard if the changes go through as proposed, Melanson said. The rules will make it harder for owners to transfer businesses over to family members, children specifically.
The Chamber of Commerce is offering assistance in helping business owners and entrepreneurs have their voices heard. It has templates for letters they can send to their MP and the federal government.