September 26, 2017
The Honourable Bill Morneau
Minister of Finance
Ottawa, ON K1A 0G5
Dear Minister Morneau,
Re: Tax Changes Have Our Local Businesses Extremely Concerned
On behalf of the Altona & District Chamber of Commerce, I am writing with respect to the consultation paper released by the Department of Finance on July 18, 2017. As an advocate for the business community our Chamber strongly opposes the proposed tax changes for reasons outlined below.
Altona is a small community located in Southern Manitoba, and is made up of approximately 4000 people. Our Chamber currently represents 160 members 99% of who fall into the category of Small Businesses according to Statistics Canada.
Small business owners in Altona are our family members, friends and neighbours. They are the backbone of our community’s economy, and the role they play is crucial. These businesses hire local people, buy from local suppliers, and contract local services. Our small businesses support and give back to their community; they donate to local causes, volunteer at local events, and participate in local issues. When our small businesses succeed, our community succeeds. If the proposed changes pass through, not only will our small business owners be negatively impacted, but our community as a whole.
The proposed changes to Capital Gains will have a detrimental impact on family operated businesses, which are the heart of our community. The changes will limit the ability to pass down businesses through generations, and they will be forced to sell to a third party. This will most definitely open up potential for our businesses to no longer have a root in our community. Once the root within the community leaves, there's nothing to stop that business from leaving as well.
Third generation small business owner, Vaughn Stephenson, President of Conquest Manufacturing Ltd. states “I have the privilege of working daily with my children to sustain and provide for our family’s future…I’m very concerned about the recent developments on proposed tax changes that will make it very difficult financially to transition ownership within our family business.”
Don Wiebe, Reeve for the Municipality of Rhineland states “Small businesses and family farms are an integral part of our local economy, and our Municipality is quite concerned should the proposed tax reforms threaten their viability and growth.”
The proposed changes to Income Sprinkling takes aim at the practice of dividend payments to family members who are very often involved in the business either formal or informally. When an entrepreneur opens a business in our community, very often the spouse helps to compensate for the risk the whole family has borne through entrepreneurship. These supportive spouses stay home to raise children so the entrepreneur can grow their business, and they contribute to the business in times of need which often goes undocumented. These proposed changes diminish that spouse’s role within the business.
The proposed changes to Income Sprinkling will also have a large fiscal impact on incorporated professionals within our community. As Altona is a small community, recruitment and retention of professional services is very challenging, and if our local professionals lose any benefit that they currently have it will hurt our chances of recruiting and retaining these individuals further, thus making it even more difficult for our community to support its needs.
Passive Income in a Corporation
Passive income is a very complicated area of taxation for our businesses and the complexity of how these businesses operate differ greatly. Some of our local businesses and farms require a tremendous amount of capital to maintain cash flow and there is some concern that new tax regulations would impose risks to this cash flow.
Jim Dick, President of Rhineland Car Co Ltd. states “We operate a capital intensive business that requires us to save money inside our corporation…These are not personal funds! They are business savings to be used to invest in my company which allow us to grow and hire more employees. These tax changes will have a very negative impact on my ability to do this. It will shrink small and medium sized businesses across Canada.”
In closing, The Altona & District Chamber of Commerce asks that these proposed tax changes be put on hold in order to ensure the full impact is considered and our local businesses are properly consulted. We invite you, The Right Honorable Justin Trudeau, and The Honorable Candice Bergen to visit our community and hear from our local businesses to ensure that there is adequate understanding of all the unique situations that exist in Canadian rural communities.
If you have any questions or concerns, please do not hesitate to contact me.
The Altona & District Chamber of Commerce
c.c.: The Right Honorable Justin Trudeau
The Honorable Candice Bergen