Six facts you need to know about Ottawa’s tax reforms: Olive
The debate over Ottawa’s tax reforms has been marred by a proliferation of falsehoods akin to the 2016 U.S. presidential campaign. Here are the facts.
Probably before the snow flies, the federal finance minister, Bill Morneau, will table a bill in Parliament that will take baby steps toward more fairness in our tax system.
The federal finance minister’s goal is to curb the use of incorporation as a tax-shelter device. The vast majority of people who incorporate are among the top 5 per cent of Canadian income earners. The current widespread misuse of this device is a means by which everyday taxpayers subsidize the wealthy.
For Ottawa, the nub of the issue is the estimated $27 billion of surplus, or “passive,” funds accumulating in “professional medical corporations” and in incorporated small businesses. Those passive funds benefit from the low small-business tax rate, but contribute nothing to the business. They serve to enrich the incorporated professional or entrepreneur at the expense of other taxpayers.
Ottawa proposes to raise the tax rate on those passive funds. It also seeks to restrict the practice of “income sprinkling,” by which small-business owners spread the company’s income among relatives with lower tax rates, who often aren’t involved in the business.
Ending those practices is essential, for obvious social-justice reasons. But more important is what this protracted debate tells us about the difficulty in achieving even minor reforms. The debate has been marred by a proliferation of falsehoods akin to the disastrous Brexit and 2016 U.S. presidential campaigns.
In its tax-reform initiative, Ottawa stands accused by vested interests of attacking the middle class, doctors, farm owners and small business.
Powerful special-interest groups say these modest tax changes will kill small-business job creation, prevent the transfer of family farms, and send over-taxed doctors fleeing to the U.S. Ottawa is also accused of springing these changes on those affected without warning.
Every one of those claims is a falsehood.
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