Friday, September 08, 2017

Taking Away Tax Breaks

There has been a lot of sound and fury recently about something called the Canadian-controlled private corporation: Tom Walkom explains:

It’s a form of corporate organization used extensively, but not exclusively, by small business. More to the point, it gives the owners significant tax advantages that most Canadians don’t enjoy.

More than that: 

Independent research by tax experts such as the University of Ottawa’s Michael Wolfson show that the use of these private corporations has skyrocketed in recent years.

In one study published by the Canadian Tax Journal, Wolfson and others calculated that the tax advantages associated with private corporations disproportionally favour the top one per cent of income earners.

The Liberals' plan to scuttle the tax break has caused a firestorm:

Small-business lobbies such as the Canadian Federation of Independent Business have reacted furiously to Morneau’s proposal. Farmers are nervous. Liberal MPs are being bearded in their ridings.

The Canadian Medical Association, many of whose physician members have formed private corporations specifically to take advantage of the tax loopholes Morneau wants to close, have levelled volleys at his scheme.

In an attempt to appeal to the prime minister’s avowed feminism, the CMA has even played the gender card, noting that the tax breaks the government wants to end allow female physicians to fund maternity leave benefits they would not otherwise enjoy.

No one mentions that "like all other self-employed individuals, physicians who choose to pay employment insurance premiums are eligible to receive up to 50 weeks of maternity and parental benefits from the government."

Canadians will sing  the praises of a government which gives them a new tax break. But woe betide the government which takes a tax break away.



Toby said...

I cannot feel sympathy for doctors, dentists and those among us who take home such very healthy incomes. I have listened to small businessmen complain about government, taxes, minimum wages, welfare cheats, etc. and then get in their very expensive cars and retreat to their very expensive homes with yards full of very expensive toys. Their sense of entitlement runneth over.

Whenever doctors and the CMA protests anything governmental I wonder if the anti public health care lobby is raising its ugly head.

The Mound of Sound said...

I don't get that last part about how physicians become eligible "to 50-weeks of maternal and parental benefits from the government." Just imagine if they took it? A lot of Canadians already cannot find a family doctor. Maternal and parental leave are for employees who are (a) not in critical demand and (b) have a secure job waiting for them when they return. Who pays their staff when these physicians go on mat leave? Who pays their office rent or their equipment leases? Who tends to their patients? You think the government picks up that tab?

What happens to a lawyer who goes on extended mat leave? Guess what? When he/she returns they'll find their client base has been forced to move on. They'll have to struggle to build a new practice from the ground up if that's even possible. And there'll be the same problems concerning office expenses, employee salaries, all of that.

Some of the loopholes need to be closed, yes. But to pretend there's not a critical distinction in circumstances between the self-employed and other Canadians is a political ploy.

Owen Gray said...

I suspect that doctors won't get much sympathy on this issue, Toby.

Owen Gray said...

Absolutely true, Mound. Not everyone who is self employed is precariously employed. Some of us are luckier than others.

Owen Gray said...

I'd like to publish your comment, Anon. But it needs to be initialed.

Lorne said...

I have been following this issue fairly closely, Owen, and it isn't yet clear to me if this is just the start of some much-needed tax reforms or the only thing the government is planning to do. If the latter, it is only a paltry sum they will receive in revenue ($250 million). If the former, it is a promising start.

Owen Gray said...

An interesting point, Lorne. I'm not sure. I have a hunch that the government thinks it can get this change. But more significant reforms would surely generate more public howling.

Trailblazer said...

@ Mound,
Chuck you Farley.

Some of the loopholes need to be closed, yes. But to pretend there's not a critical distinction in circumstances between the self-employed and other Canadians is a political ploy.

I have been self employed for twenty four years.
Many years the taxman nearly put me out of business with their demands.
Granted ; I know others that pay no income taxes but many of us are above board and pay our share.
Not only am I a tax payer but a tax collector!


Owen Gray said...

I'll let Mound respond, TB. Suffice it to say that there are distinctions between the self employed. As the father of three fairly recent university graduates, it seems to me that self and precarious employment is much more common today than when I graduated. The kids couldn't avail themselves of the tax break. But many wealthy self employed professionals could.

The Mound of Sound said...

Owen, I have no idea what TB is on about. He seems to agree with me but can't understand my point. A Seniors' Moment perhaps.