A controversial proposal from the federal Liberal government to remove "unfair tax advantages" has some Calgary small business owners crying foul.

In July, Finance Minister Bill Morneau released a plan aimed at closing tax loopholes that the government has said unfairly let business owners pay lower taxes.

The plan would crack down on wealthy Canadians avoiding higher tax rates by incorporating themselves and drawing income from their businesses while paying lower corporate taxes.

In a letter to Morneau, Yale & Partners LLP Chartered Professional Accountants said the proposed changes could lead to a tax rate of 73 per cent on a corporation's investment income, a rate that Calgary business owner Tom Spenceley says is far too high.

"It's a business killer," Spenceley said. "Why would I start a business and do anything at all when I'm subject to a 73 per cent tax? Why don't I just go work for someone?"

Spenceley has called a meeting with Liberal MP Kent Hehr to contest the proposed tax changes, changes Spenceley says unfairly target small businesses.

"That's hardly fair because we played the rules right up to this point from day one only to find out now they want to change the rules," Spenceley said. "Where does fair come from that?"

'These rules … impact business'

The proposal would restrict business owners from spreading income to family members in lower tax brackets, limit the use of private corporations to make passive investments, and limit the ability for a corporation to convert regular income into capital gains.

A 75-day consultation period to review the proposed changes ends Oct. 2 — a window Amber Ruddy with the Canadian Federation of Independent Businesses says is too short.

"If this were to address cracking down on people abusing the system, that would be one thing. But that's not the case," Ruddy said.

"These rules would absolutely impact business owners across the spectrum well beyond these so-called 'wealthy' individuals."

The Calgary Chamber of Commerce also said it wants more time to provide feedback on the proposed changes and is polling its members on how they will be impacted.

Issue for caucus retreat

Liberal backbenchers — who have been bearing the brunt of the backlash from doctors, lawyers, accountants and other small business owners upset about the plan — are preparing to vent their concerns during the government's summer caucus retreat next week in Kelowna, B.C.

"There is a genuine outrage among people who have made all their financial calculations and planning based upon a certain set of tax assumptions and are now seeing those tax assumptions challenged," said Toronto MP John McKay.

"I don't know at this stage how locked-in the government is on their proposals, but I do know there is significant outrage among a relatively influential group of people."

Those people would be "really irritated" if the consultation turns out to be strictly pro-forma, McKay added.

Winnipeg MP Robert-Falcon Ouellette said he's heard loud complaints in his riding about the proposed changes, but has also received feedback from others who say it's time for a more level playing field when it comes to taxes.

Corrections

  • An earlier version of this story said that a letter from Yale & Partners LLP Chartered Professional Accountants to Finance Minister Bill Morneau predicted a tax increase of 73 per cent. In fact, the letter predicted a tax rate, not a tax increase, of 73 per cent on a corporation's investment income.
    Sep 01, 2017 1:30 PM MT
With files from Kate Adach and The Canadian Press