Tax changes not just for the wealthy: tax experts
Kim Moody of Moodys Gartner Tax Law in Calgary, left, seated next to Ina Potts of MNP, speaks to a crowd of over 200 people regarding federal tax change proposals at the Blackfalds Community Centre on the evening of Wednesday, Sept. 13, 2017. (Ashli Barrett/Lacombe Globe)
The Liberal government’s rhetoric that proposed tax changes affecting small businesses are an attack on the wealthy is one tax experts are trying to change.
During a town hall meeting held by Red Deer-Lacombe MP Blaine Calkins last Wednesday at the Blackfalds Community Centre, more than 200 people heard from a trio of those experts as they explained changes they believe will hurt entrepreneurs.
Kim Moody, director of the Canadian Tax Advisory at Moodys Gartner Tax Law in Calgary, was the key speaker and he held no punches back in his criticism of the changes.
“Every time you see Trudeau and Morneau say these rules don’t apply to people who have $73,000 of income or less – lately it’s been $100,000 of income or less – that’s just a lie and I don’t use that word lightly because it’s a strong word,” he said.
“These are changes that are not attacking the wealthy – they’re attacking pretty much everyone. These are not tweaks, these are not fixes; they’re tax policy changes that affect pretty much everyone that’s an entrepreneur.”
Tax change proposals were released July 18 by the Department of Finance and include the restriction of income splitting, investment in passive assets and the conversion of dividends to capital gains.
Both Minister of Finance Bill Morneau and Prime Minister Justin Trudeau have defended the changes as ways to close “unfair loopholes” for business owners.
Moody, however, refuted loopholes existed, calling it nothing more than populist language from the finance minister being used to convince people that business owners currently have unfair tax advantages. For that very reason, he said it was important to educate people on what all the changes entail.
“The bottom line is every single proposal has an impact to the small business entrepreneur to the medium size to the very wealthy,” Moody said. “A simple example is a small business sprinkling dividends to a mom and pop shop. They’re sprinkling $30,000 of dividends. If one of those spouses is inactive and doesn’t pass ‘reasonable’ tests, they’re going to be impacted with a huge tax increase.
“That’s not fair.”
Under the conversion of dividends to capital gains, he said in a worst case scenario, tax could jump dramatically from 41 per cent to 82 per cent, while investing in passive assets – bonds, stocks etc. - rather than active assets in the business could see investment income taxed at 71 per cent.
Changes like these, Moody said, have resulted in a number of his own corporate clients leaving the country - $4-billion worth with more likely on the way.
That point in particular raised alarms for Calkins, who said the scope of the proposed changes was far larger and more worrisome than he’d originally thought.
“When we have accountants saying they’ve got people moving billions of dollars out of the country to avoid tax changes and have a better, competitive environment for their businesses, it’s something Canadians should be worried about,” he said.
“It’s not simply a matter of nuanced language trying to make it seem like there is a tax problem that needs to be fixed. Really, there’s a spending problem that needs to be fixed and that lays solely at the feet of the Prime Minister who has blown his budget promises and is now basically reaching into the pockets of hard-working Canadians to try and balance the budget he thought would just balance itself.”
More than 60 different organizations, including the Chamber of Commerce, Canadian Federation of Independent Business and bodies representing doctors, are advocating against the changes. Even a few Liberal MPs have broke rank with their party, such as Saint John-Rothesay MP Wayne Long, to disagree with amendments and push to extend the consultation period set to end just two weeks from this past Monday when Parliament resumed.
Calkins said it was clear what the message from his constituents was on the topic, and promises to do what he can to sway the Liberals position on their behalf.
“It’s now come down to political pressure and it’s my job to try and talk reasonably and sensibly to my colleagues from the Liberal Party in Ottawa,” he said. “Our job as politicians, our job as business people and farmers is to convince Liberal MP’s to retreat from these proposed changes until we’ve had a lot more time to study them.”
He noted those concerned can sign electronic petitions, as well as reach out to the Liberal MP’s in the province, including Cabinet Ministers Amarjheet Sohi and Kent Hehr.
“The majority Justin Trudeau has in the House of Commons hangs by a balance of 13-14 MPs. That’s all we need to convince to get the government to change its mind,” said Calkins. “I’m really proud of the community to come out tonight. I wish it was under better circumstances, but I think any politician that wants to raise taxes should take note of the attendance here tonight.
“I want farmers to be able to hand their farms down to their families, businesses to make payroll and pay their employees and we should be wary of any tax changes that could put those in jeopardy.”