TORONTO — The Toronto Construction Association (TCA) has issued an appeal to its members to join the Canadian Construction Association and the Canadian Chamber of Commerce protest against proposed tax changes for small businesses introduced by federal Finance Minister Bill Morneau in July.
TCA president John Mollenhauer said in a statement issued Sept. 27 the proposed changes would have a "profound" effect on small and medium sized businesses and urged his members to write to their Members of Parliament using a form found at protectgrowth.ca.
The announced deadline for public consultation is Oct. 2.
The changes are intended to curtail income sprinkling among family members, prevent corporations from converting regular income into capital gains and restrict passive investments in a corporation, notes the ministry website.
Income sprinkling involves diverting income from a high-income individual to family members with lower personal tax rates, or who may not be taxable at all, the website explains.
Converting a private corporation’s regular income into capital gains can also provide an "unfair opportunity to reduce income taxes," the finance website states, by taking advantage of the lower tax rates on capital gains. And retaining passive investments in a corporation takes advantage of the fact that corporate income tax rates are much lower than personal tax rates for higher-income individuals, the site indicates.
The proposed changes, Mollenhauer writes, would not allow family members to receive dividends unless they pass reasonableness tests. If the tests are not passed, meaning it’s been concluded income is being distributed to family members who are not actually working, the tax rate will be at least 50 per cent, he said.
"The proposed changes will also make it difficult to retain excess earnings earmarked for such things as "future" capital items, retirement included, said Mollenhauer, given that the accumulation of passive investments will attract a 50 per cent tax.
And Morneau is proposing to limit the capital gains exemption if small business owners sell their business to family members, said Mollenhauer.
"You need to stop this," he said. "It is vitally important that you act and act now."
At the protect growth website, protesters can click the Write Your MP button and use the password Chamber2017.
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