KAMLOOPS — Months after federal Finance Minister Bill Morneau introduced proposed changes to small business tax, the reaction in Kamloops and across the country has been overwhelmingly against.
Small businesses are reeling at the thought of a new tax policy that could come into effect as early as January. They are fighting what they call an "insult" by the Liberal government.
"Them calling these policies tax loopholes. I can tell you they're not loopholes. They're tax policies. Business owners are not crooks. They are not going through a loophole to make more money," said Paul Ross, partner at Emsland Insurance and president of the Kamloops Chamber of Commerce.
Finance Minister Bill Morneau argues that certain small businesses are using their corporate status to pay less of their fair share of taxes. While the changes target the wealthy, small business owners — some of whom just getting by — will be greatly impacted.
Ross works at Emsland Insurance, the only 100 per cent locally owned insurance company in Kamloops. He said the businesses is among those that will be squeezed by these changes.
"As soon as you lose any money, you lose the flexibility," Ross said. "And so money that goes to the government. They want to increase taxes. So you can't expand, you can't hire new people, you can't buy new equipment. It becomes very difficult in cash flow situations if things go downward for a few years, the economy goes backwards. You need to rely on that cash flow you have in your business."
Leni Riechor, an accountant with KPMG, has a number of small business clients who are concerned about their livelihoods.
"We usually have financial plans for the next year. How much money they're going to take out as a family to live and how much tax they're going to pay," said Riechtor. "Right now, we don't know where this falls next year. Should we pay a higher dividend this year because this is the last year we can divident sprinkle? What happens next year?"
The Liberal government, Reichor noted, is targeting family-operated small businesses with only one member who actually is active in the company, while the other members of the family, like a spouse, are simply investors.
"So if you have a company that earns active income, but then has cash left in the company, it wants to leave that cash sitting in there for a rainy day down the road, or it's a safety cushion, or retirement savings, the new proposed rules are really punitive to earn investment income in a company."
Ross, who's also the president of the Kamloops Chamber of Commerce, travelled to New Brunswick this summer to take in a presentation by Morneau and his proposed changes. He noted small businesses are making their voices heard.
"The policy we put forward and voted on in New Brunswick, by all of Canada to oppose the tax change, we asked to extend the consultation period more than 72 days. We also asked for a Royal Tax Commission to keep taxes out of the political world and keep it as an independent consultation and policy procedure going forward."
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