Tax reform and tax reductions: mixed reception to the proposals of Ottawa

Photo Agence QMI, Sebastien St-Jean

Maxime Huard

Monday, 16 October 2017 16:16

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Monday, 16 October, 2017 19:06

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OTTAWA | The tax cuts for SMES, and the decline of the Trudeau government on some aspects of his tax reform have been greeted on Monday with scepticism by the opposition and with enthusiasm, caution by the business community.

• READ ALSO : The federal government will reduce the tax rate of SMES

The opposition parties have essentially criticised the government to improvise in the face of a political storm. “The liberals defended their proposals last week. They change their opinion now only because the business owners are outraged,” said the leader of the conservatives Andrew Scheer.

“We are witnessing a public relations operation, has denounced for its part, the Bloc quebecois leader Martine Ouellet. The tax reform is an attack on the middle class and, during this time, the multi-millionaires get the tax havens.”

The New democratic Party (NDP) has criticized, to him, the problem of the message of the Trudeau government. “The liberals are enmeshed in a pseudo-tax reform that they fail to adequately explain,” argued the chief parliamentary NDP’s Guy Caron.

In the business community

If they have welcomed the tax reduction granted to SMES, the business organisations have called the Trudeau government to be cautious about tax reform.

“[The tax cuts] will allow SMES to have hundreds of millions of dollars to support the creation of jobs and grow the economy”, reported by press release the vice-president of the canadian Federation of independent business, Martine Hébert. However, it noted that certain aspects of the tax reform “remains a concern”.

Even the sound of a bell of the Conseil du patronat du Québec (CPQ). “Before you go too far, [it should] take the time to analyze the economic consequences of the proposed changes,” said the president of the CPQ, Yves-Thomas Dorval.

Controversy

The tax reform has resulted in a barrage of criticism since its presentation in July as part of the business community, the opposition and even within the liberal caucus. Several observers believe that the government is unfairly to small entrepreneurs, doctors and farmers.

“I heard the people who thought we went too far”, said the minister of Finance Bill Morneau, who made his announcement at a restaurant in the suburbs of Toronto.

The proposals

Tax cuts: the government confirmed on Monday that it would reduce the tax burden on small and medium-sized enterprises (SMES), a campaign promise of 2015. As of 1 January 2018, the tax rate will increase from 11 % to 10 %. It will be then 9 % in January 2019.

Income splitting: the minister Morneau has also announced that it will “simplify” from the 1st January 2018 the limits of income splitting between members of the same family. It will now be impossible for an entrepreneur to reduce his taxes by splitting income with family members who do not contribute to the company. By contrast, “there will be no change for those who work in the company,” assured Mr. Morneau.

Capital Gains: the government has done a volte-face on the subject of the exemption lifetime capital gains. The minister of Finance and the prime minister have repeatedly said that there would eventually be no change to the rules that allow the current owners to pass on from one generation to the other in a family business without having to pay huge amounts of taxes.