Tax Consultation Update

October 11, 2017

I would like to thank all the business owners, farmers, professionals, and community members for participating in the consultation process around tax changes that were proposed in July.  I want to give you all an update on where things now stand.  We have certainly heard from a wide spectrum of people and businesses.  I want to restate the purpose for considering changes to our tax code and I want to let you know what I have heard during the consultation process, as well as indicate our next steps.  We have received some great suggestions, which were consistent with suggestions we received from other parts of Canada.

What I have heard from Consultations:

Policy objectives:

  • A growing amount of money is sitting passively within a select number of high income businesses: 80% of passive investments are sitting in 1.7% of businesses.  Tax regulations have not stimulated business investment, or contributed to economic growth.  $400 billion is parked in small businesses with $27 billion per year more real money (1% of GDP) goes into passive investments, not into the economy. 
  • High Income earners have tools available to reduce the amount of tax they pay by taking advantage of small business tax rates though establishing Private Corporations.  There is an inequity in the tax system that allows high income earners to pay lower taxes than other earners.  Canada needs a more equitable tax system.
  • This policy is 100% aligned with what we said we would do if elected during the campaign.  The consultation was to determine the best way to move forward, with a policy that was developed informed by constituents.

Issues we have heard:

  • Feedback by MP’s from their constituents, as well as business owners and advisors directly.
  • Feedback is falling into 5 general areas:
    • Small businesses need to be protected from unintended consequences
    • Family farms have succession plans that need to be considered in tax changes
    • Women entrepreneurs have particular needs to allow for maternity leave and other expenses
    • Tax rates for small business need to be kept low as well as big business tax rates
    • The administrative effectiveness of CRA rulings need to be transparent and simple
  • There are particular issues around physicians in Ontario who were encouraged to form Private Corporations in their bargaining with the Province.
  • Existing savings should not be subject to new taxes.

Process:

  • Moving forward with purpose: investment in economy to add to growth.
  • Making a taxation system equitable to ensure all tax payers contribute, including high income earners.
  • Timeline to conclusion is being actively pursued but no timeline yet on draft legislation.
  • Draft legislation needs to be completed with feedback from the consultation, then will be released in Parliament, and then will go through the standard legislative process such as readings, debate and committee review.
  • Need to get past uncertainty to draft legislation.

Continued engagement:

  • As draft legislation is presented, I will engage with people who have formed round tables, submitted comments and suggestions, and the general public.

I thank you for your contributions to date and will definitely keep you posted when policy is drafted and as this file progress.

Sincerely,

 sig

Lloyd Longfield

Member of Parliament for Guelph