Tax worries

To the Editor:

Re: Tax proposals about fairness: minister (Page 11, Sept. 21). If there was ever an article that dumbs down an issue and treats those affected by it as stupid, this is it. It’s equivalent to patting a six-year-old on the head saying, “don’t worry, it will be all right.” Well Mr. Editor, it is not all right.

The Department of Finance is perfectly capable of bringing forward legislation, endorsed by the legislators, that has significant unintended consequences. Mr. (Bill) Morneau has brought forward ill-conceived legislation to target a “select few” that results in the most significant changes to the Income Tax Act since 1969, which will affect not only the “select few,” but all farm and small business corporations.

There is a concept in Canadian taxation called “integration,” which ensures that the tax paid by an unincorporated business proprietor is essentially the same as that paid by a corporation plus its shareholder(s) on business income funnelled through a corporation to the shareholder(s). Holding earnings in a corporation without distributing them to the shareholder(s) defers tax, but that income is not analogous to proprietor income because it is not available to the shareholder to spend as he/she wishes. It is retained in the corporation for growth and investment until the funds are distributed to shareholder(s) through dividends.

This concept is not well understood by the general public or, apparently, the Department of Finance, because the proposed legislation significantly penalizes small business corporations on the flow-through of income. Tax specialists and analysts are working through the numbers in a variety of scenarios and I sincerely hope that Mr. Morneau pays attention.

Mr. Morneau insists on equating employees with business owners. Why? Employees are entitled to standard hours of work, overtime, holiday pay, vacation pay, health benefit plans, pensions, EI, sometimes even subsidized lunches in the government cafeteria — none of which is an entitlement of business owners. Farmers know that as business owners they work long hard hours in unstable and risky conditions for their business income. Employees are different from shareholders.

If this legislation is passed as drafted and proposed, it will contribute significantly toward a defeat of the Liberal government. Is that the legacy you want, Mr. Morneau?

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