Small business owners in Surrey and the rest of Canada will receive a tax cut from 11 to nine per cent over the next two years the federal government announced Monday, in a move to remedy what Surrey Board of Trade CEO characterized as a “communications disaster.”
The feds went into damage control following harsh criticism from accountants, doctors, lawyers, store owners and other small business operators over proposed tax rule changes the Trudeau government floated in July which would end passive investment income and “income sprinkling,” which governs how business owners pay salaries to their relatives.
“It’s been just such an aggravating time for business in general, these tax reforms,” Anita Huberman, CEO of the Surrey Board of Trade, told the Now-Leader. “First of all the consultation period was short (75 days), it was during the summer, the impact to business and their bottom line would have been significant. It was such a huge outcry from business and so I think finally the federal government has heard it.”
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“This has been a communications disaster for the federal government and I think they’ll also admit that too, and we’ve been hearing that from them,” Huberman said. “I think they’re trying to address all of the concerns that have been brought to them by business and I think they’re trying to remedy such a significant backlash.”
Randeep Sarai, Liberal MP for Surrey-Centre, told the Now-Leader Monday that “basically we’re fulfilling our promise to do a small business tax rate cut so it’s going to drop from 11 to nine per cent over the next two years so effective January 1st, 2018 it’ll go down to 10 per cent, and the subsequent year, 2019 January 1st it’ll go down to nine per cent and that will make it the lowest in the G7, by far.
“This is kind-of phase one of the announcement, you’ll probably be seeing subsequent announcements this week outlining some of the other changes and concerns that people have I guess with respect to passive income sprinkling and passing along the family businesses such as farms, on to their children,” Sarai added.
“This is the largest tax consultation I think — one of the largest — in Canadian history.”
The consulation period ended Oct. 2nd. Huberman noted, on what fueled the backlash, that “for small business there was a bit of a (tax) reduction but if there was any passive cash, so to speak, within a business, it would have been taxed as high as 73 per cent from the 50 per cent range.
“And CRA would have been the only one doing the reasonability test on each business, on what tax percentage they pay. This is a problem for business.”
Huberman called Monday’s announcement a “step in the right direction,” though.
“However, we’re really focussed on what they’re about to announce,” she said. “We’re watching very closely.
Sarai said it’s his “assumption” the meat of Monday’s announcement “will probably go into the budget, in 2018. In the spring of 2018, when they do the budget, that’s when it will formally go in.
“Our goal is to obviously help with the smaller businesses and get them the help they need,” he said, “while at the same time making sure people aren’t misusing small business breaks for purposes other than growing small businesses.”
Meantime, B.C. NDP Premier John Horgan kicked off Small Business Week and Manufacturing Week (Oct. 16 to Oct. 20) by announcing the provincial government is reducing the small business tax rate from 2.5 per cent to two per cent.
According to the provincial ministry of jobs, trade and technology, 98 per cent of all businesses in B.C. are small businesses, which all told generated 34 per cent of B.C.’s GDP in 2016, a figure higher than the Canadian average of 31 per cent.
Roughly 1,056,300 British Columbians were employed by a small business in 2016.
tom.zytaruk@surreynowleader.com
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