Morneau says changes to tax proposals will be needed after weeks of outcry

After weeks of public battering and opposition politicking, Finance Minister Bill Morneau is signalling that he plans to make changes to the Liberals' proposed tax changes, stopping short of providing discernible details.

Opposition sees comments as a 'climb down'

Finance Minister Bill Morneau is trying to reassure small business owners that his proposed tax changes eliminating some tax saving vehicles are not an attempt to target family farms or punish small business owners. (Fred Chartrand/Canadian Press)

After weeks of public battering and opposition politicking, Finance Minister Bill Morneau is signalling that he plans to make changes to the Liberals' proposed tax changes, stopping short of providing discernible details.

On Tuesday the government released a list of five key principles it hopes will reassure Canadians that it is not targeting most small business owners, including a promise that the transfer of family farms to the next generation would not be affected by the tax changes.

"Changes are going to be required — as we move forward we will have more information on timing," Morneau said in an interview after facing questions in the Senate.

"For those pieces of legislation that we've already drafted, we'll take into account what people have told us to determine how we go forward from here."

The Conservative's finance shadow critic Pierre Poilievre called it a "climb down," and predicts the Liberals will rip up some of the more controversial elements of their proposal.

"Liberals will raise the tax on split income rules to age 24, but drop most of the other sprinkling proposals, I predict," he tweeted Tuesday. Currently business owners can spread profits to family members between the ages of 18 and 24.
  When the government launched its consultation over the proposed changes in the summer it argued the tax system is unfair because it encourages wealthy professionals and business owners to incorporate to pay lower taxes. 

But pledging to crack down on those getting what the Liberals call an unfair tax advantage has sparked outrage among small business owners who say the move will unfairly target them, making it hard for them to grow and hire new staff. Premiers, doctors and backbench Liberal MPs have also piled on criticism.

The government's original plan included restrictions on income sprinkling, which is the practice of transferring income from a business owner to a child or spouse who would be taxed at a lower rate.

It also proposed limits on the use of private corporations to make passive investments that are unrelated to the company and would curb the ability of business owners to convert regular income of a corporation into capital gains, which are typically taxed at a lower rate.

Poilievre and Morneau in QP on taxes

5 years ago
Duration 1:26
Conservative Finance Critic Pierre Poilievre asks Finance Minister Bill Morneau about taxes in Question Period

Promising to act on what he heard from small business owners during the Liberals' consultation period that ran from July 18 to Oct. 2, Morneau suggested that all three parts of the plan could see adjustments.

"We do need to make sure we take into account people's points of view. That means reviewing what we've received, making sure we fully understand it and responding appropriately," he said.

While the five principles released Tuesday are short on details, the Liberal government suggested they'll be the road map for any upcoming changes:

The principles include:

  • Support small businesses.
  • Keep small business taxes low while supporting owners who invest and create jobs.
  • Avoid creating unnecessary red tape for small businesses.
  • Recognize the importance of family farms, and ensure tax changes do not affect the transfer of family businesses to the next generation.
  • Ensure any changes to the tax system promote gender equity.

One thing Morneau was clear on was that they won't be extending the now-ended consultation period.

The Tories introduced an opposition motion Tuesday that called on the government to extend the consultation until Jan. 31, 2018, but it was defeated in the House of Commons.


  • A previous version of this story suggested passive investments within a company are tax-free. In fact, the funds used for passive investments have been taxed at a lower rate.
    Oct 04, 2017 9:36 AM ET

With files from The Canadian Press