Langley small business owners in letter campaign to protest federal tax changes

Proposed tax changes meant to close loopholes could cripple family businesses, Chamber fears


Times Reporter

Dozens of Langley small business owners, a local lawyer and the Greater Langley Chamber of Commerce have together started a letter writing campaign urging the federal government to scrap proposed tax changes they say could potentially cripple people’s livelihoods and prevent new businesses from opening.

Finance Minister Bill Morneau released the details of the tax changes on July 18 and the federal government’s consultation process ends Sept. 18.

The changes have been designed to close what the government calls ‘tax loopholes’ that private businesses use to gain an unfair advantage, said Morneau.

Changes include the curtailment of “income sprinkling,” a method by which business owners shift a portion of income to family members, either through salary or dividends.

It also will stop “passive investment income,” which the government describes as the investment of money left in a corporation, for purposes other than to invest directly in growth.

The changes are meant to target wealthy corporations, but in fact, will hurt small businesses the most, said lawyer Scott Johnston.

“As a business lawyer and corporate counsel for hundreds of incorporated small businesses in Langley, I am deeply concerned about the recent disastrous and foolhardy proposal by Finance Minister Bill Morneau to eliminate income splitting in private corporations,” said Johnston.

“The overwhelming majority of the Langley companies that I represent as counsel are “one woman” or “one man” shops: incorporated family businesses that utilize income splitting as a form of tax planning for their immediate families.

“These companies are primarily incorporated landscapers, HVAC contractors, electricians, plumbers, maintenance contractors, service providers, and other skilled trades: hardly the so-called “rich” doctors and lawyers that this scheme falsely claims to target.”

Scott Waddle, owner of Precision Auto, also wrote a letter to Langley City-Cloverdale MP John Aldag voicing concern about the effect the tax changes will have on family businesses like his.

“Many small businesses are tradespeople or professionals who have invested in training, education and equipment and need the existing tax rules to allow them to survive long enough to become profitable,” Waddle wrote.

“Why would anyone take the risk of starting a business and putting their financial lives at risk if they’re just going to have it all taxed away?”

Langley Chamber president and Otter Co-op CEO Jack Nicholson has urged members to write to their MPs about the changes.

He warns that family members who are employed with incorporated business will be impacted. “The government wants to scrutinize their [family members] compensation to apply a much higher tax rate on income they consider “unreasonable.”

“Do you invest the profits from your business?”

The federal government is proposing to tax that income at an effective rate of 70 per cent, said the Chamber.

“Do you want to pass your business on to your children?”

The new rules will make it difficult for younger kids to get the capital gains exemption. They could be double-taxed, Nicholson said.

Responding to a request for comment, Aldag’s office indicated the MP will meet with the members of the Cloverdale District Chamber of Commerce and Cloverdale Business Improvement Association on Thursday, Sept. 14 from 4 p.m. to 6 p.m. to consult with them on the proposed tax changes.

His office is also in the process of scheduling a consultation with the Greater Langley Chamber of Commerce and the Downtown Langley Business Association. On Aug. 30, the Surrey Board of Trade hosted a consultation with its members and a representative from Aldag’s office attended and recorded feedback on behalf of of Langley’s MP who was away.

Aldag also has meetings scheduled over the next two weeks with a number of small business owners in Langley to get their feedback on the proposed changes.

Anyone who would like to know more about the tax changes or to provide feedback to the federal government can click here.