The Canadian Bar Association has joined dozens of other business groups to call on the federal government to drop proposed tax changes for private corporations.
This summer, the federal government unveiled a number of proposals that would affect the taxation of private businesses in an effort to tackle perceived inequities in corporate taxes. But the Coalition for Small Business Tax Fairness, which now has 42 member organizations, says these changes will unfairly affect small business owners and professionals, including lawyers and law firms.
The changes include restricting the ability of business owners to sprinkle income with family members and limiting a business owner’s ability to claim business income as capital gains. Another proposal would look to close a loophole that allows individuals to pay lower taxes on passive investment income that is held in a corporation.
René Basque, a past president of the CBA, says the changes would negatively impact lawyers and small firms.
He says that while the proposals are meant to target the wealthy, a vast majority of lawyers make less than the $220,000 identified by the government as an example of a high income in its consultation paper on the topic.
“It’s going to affect the ability of independent businesses and professionals, including lawyers, to survive in challenging times,” he says.
“It won’t help financial growth, innovation and job creation.”
Basque says the changes will make lawyers less aggressive entrepreneurs. When Basque bought into his New Brunswick firm, Actus Law Droit, he says, he took a risk but figured the firm would grow.
He has seen his firm grow and double in size over the years, but he says he was only able to do so by putting some funds aside so that the partners would not have to go too far into a line of credit or a loan. Basque says he might not have taken the same risk with the proposed changes in place.
“It may stifle the enthusiasm,” he says.
Basque says he also personally planned his future retirement based on tax measures that have been in place for decades.
“You’re going to tell me that if . . . I put money aside for the bumps in the road, for my future planning [and] for my having some monies put aside for my retirement, that if I leave the money there, you’re going to tax me at the highest tax rate at that point. I think it’s going to affect people greatly,” he says.
In addition to unfairly targeting small businesses and professionals, Basque says the proposals will not grow the tax base to the extent the government hopes.
The CBA and the wider coalition have also criticized the length of the consultation period, which runs until Oct. 2, as too short.
Basque says the CBA has engaged with anyone who could affect the final decision on the topic, including the minister of justice, minister of finance and parliamentary secretaries in an effort to stop the proposals.
The coalition has asked the federal government in a letter published this week to scrap the proposed changes and launch “meaningful consultations” with the business community to tackle defects in tax policy “without unfairly targeting independent businesses.”