Budget Morneau: easing which will leave SMES on their hunger

Photo archives Agence QMI, Matthew Usherwood

Maxime Huard

Tuesday, 27-feb-2018 16:23

UPDATE
Tuesday, 27-feb-2018 16:27

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OTTAWA – Detailed in the federal budget tabled on Tuesday morning, the latest patches of the controversial tax reform does not soothe not completely the dissatisfaction of the small and medium-sized enterprises.

After first revisions announced at the end of last year, the minister of Finance, Bill Morneau, has finally relaxed the proposed change to the taxation of income from passive investments businesses, which include equity investments, or rental income.

Rather than increasing, as originally planned, the taxation of all investment income liabilities exceeding $ 50,000, Ottawa will put in place a progressive system.

All companies with $ 500,000 in revenues and less will be eligible for the tax rate of SMES if they have less than $ 50,000 in income on their passive investments. Of 50 000 $ to 150 000 $, the amount of income eligible for the tax rate of SMES will decrease in a gradual manner.

“Even though the government has attempted to mitigate the impacts of its changes, it’s still a cost to be expected for several companies,” responded the vice-president of the canadian Federation of independent business, Martine Hébert.

She deplores the fact that this tax change may represent additional costs ranging up to $ 30,000 for an SME. “We let it run the big players and it removes a small,” added Ms. Hébert, in reference to the giants of the web, such as Netflix, which enjoy a “special treatment” in the matter of taxation.

The primary purpose of the measure is to get companies to reinvest their investments in their business rather than letting their money sleep.

However, according to the tax expert, Sylvain Gilbert, the new measure announced will not deter the professional to continue to accumulate investments, because they will retain a tax advantage to incorporation.

“It is a far more simple and less severe than initially anticipated, but it is not perfect, because it is targeted at all SMES. Is it really them that we wanted to aim for?”, request the expert of Raymond Chabot Grant Thornton.

In point of press in the lock-up of the budget, the minister Bill Morneau has claimed to have listened to the grievances of the entrepreneurs to these changes, while keeping “a vision to ensure that the system is fair”.

The government expects to recover more than $ 900 million per year until 2023, thanks to all of the measures of the tax reform.

Giving in to the pressures of entrepreneurs across the country, the minister Morneau had already declined in the last year about the limits imposed on the income splitting between members of the same family and on the capital gains exemption.

He had also announced a reduction in taxes for SMES, increasing the rate from 11% to 10 % in January 2018, and 9% in January 2019.