Federal Government is Exiling Canadian Entrepreneurs
Small businesses are the lifeblood of the Canadian economy. They support millions of jobs, and increase the GDP with their productivity. Their owners are keenly aware of the obstacles: a high chance of failure, slim chances of obtaining external capital, long hours for often low pay, no pension plans or health benefits, not to mention unexpected surprises and sleepless nights. They assume these personal risks for the chance of shared success.
One assumption made by entrepreneurs is that government policies will remain reasonably stable and competitive over time. Tax rates may bob up and down, but the business environment will always be one in which entrepreneurial activity is encouraged and rewarded. Few would choose to invest in a climate of high uncertainty, where shareholders’ net worth is usurped, or where the government demonizes its entrepreneurs as opposed to lionizing them. Unfortunately, the business environment in Canada may be becoming just that.
The Federal Government has raised the concern that Canadian private businesses are utilizing the difference between the corporate tax rate and the personal tax rate to purchase investment (passive) assets. The Government has now proposed that investment income over $50,000 per year will be subject to integrated tax rates upwards of up to 75% in a one-size fits all solution.
This policy will not impact public corporations or foreign-owned businesses operating in Canada, leaving the competition to private corporations unscathed. Why have they been excluded from this proposed policy? Could you imagine attracting Amazon or Google when they could only earn $50,000 of investment income before being subject to exorbitant tax rates?