As Prime Minister Justin Trudeau and the federal government dig in their heels on small business tax reforms, at least one Penticton business is holding its position as well.
Jason Cox, owner of People’s Soda Company, said he wasn’t able to attend a town hall event hosted by Trudeau in Kelowna Wednesday evening, but said he didn’t feel it would have been effective even if he could have.
“I know (my words) won’t be heard, because Prime Minister Trudeau and (Finance Minister) Bill Morneau said at the start of this that they’re having a 75-day consultation period and that they wouldn’t be swayed,” he said.
“What kind of consultation period is that? Why would I take time out of my business to go talk to someone who’s said in advance there’s nothing we can say to them to change their mind.”
Trudeau did say while he isn’t willing to back down on the tax changes, the government is interested in receiving feedback on how better to fix the issue of those dodging taxes using loopholes for small businesses.
“We need to make sure we’re doing things that encourage people to succeed, that tell all of you, and indeed everyone, that if you work hard, you will be rewarded; you will be able to build success,” Trudeau told a crowd at UBC Okanagan. “The issue that we were facing when we came into office was that the tax system, and you guys know this, the tax system has built into it things that disproportionately advantage the wealthiest Canadians.”
Trudeau pointed to stagnating middle- and lower-class wages, compared to top-tier wages over the past three decades, which he said can be attributed to, in part, wealthy Canadians inappropriately using tax loopholes to dodge personal taxes.
That includes spreading income more thinly over family members to avoid paying higher tax brackets; holding income in the business as a “passive investment” to avoid paying high tax brackets, instead paying the far lower small business tax rates and converting regular corporate income into capital gains, also at a lower tax rate.
Small businesses are on the verge of a revolt over the tax reforms, according to Canadian Federation of Independent Business vice-president Richard Truscott.
“I haven’t seen this kind of concern out there since back in 1971, when the CFIB was formed in response to tax changes at that time to increase the small business rate to 50 per cent and leave the big business rate at 25 per cent,” Truscott said. “Our phones are ringing off the hook since this proposal was announced.”
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Truscott compared the changes to “using a sledgehammer to kill a fly” — Cox’s analogy was to kill a fly “with a bazooka” — with most small business owners making less than $73,000 per year.
“What this tax change is proposed to do is limit the amount that I can employ children and — not just children, but family members — and where and how I pay them, and how that is reasonable,” he said. “My kids do, obviously, work in my business.”
With regards to the passive investment loophole, which the federal government says can be used to skirt personal income taxes, Cox said closing the loophole could also affect rainy day savings for small businesses.
“We’ve had a summer here, where we’ve had first floods, then smoke and next thing you know the summer iss over and the snow is going to come,” Cox said. “So this could be a down year for a lot of people, and what you’re doing is taking an opportunity away from them to draw on resources from good years to get them through bad.”
Cox said he didn’t feel as though he would have a voice at the town hall event held by the prime minister this week.
“I’m a big believer that actions speak louder than words. Unfortunately, I’m also very well-connected in the Canadian Chamber of Commerce movement,” he said.
“They haven’t sat down with the organizations that represent 90 per cent of the small businesses in this country … Me as one, tiny small business owner in the Okanagan, going to try to get the attention of the prime minister, I’m not encouraged.”
—with files from Barry Gerding