Liberals have been tone-deaf on small business tax dialogue, Kim Moody says

The Liberal government is sticking it to the small-to-medium business owner with its new tax proposal.

That’s the opinion of of Kim Moody of Moodys Gartner Tax Law in Calgary, who says that along with reworking the substance of the proposed changes, the Libs need to overhaul their messaging, which has so far done nothing more than alienate members of the business community with its offensive language.

The federal government just wrapped up its consultation period on the new tax strategy aimed at closing loopholes in the taxing of private corporations, announced this past summer. The previous three months have not been easy for Finance Minister Bill Morneau and the Liberal government, as they’ve had to endure a constant stream of criticism on the file from virtually all sides.

Opposition members of parliament (along with some Liberal backbenchers) have rained down on the government, taxpayers associations have claimed that the proposed changes amount to nothing more than a tax grab, meanwhile incorporated sectors of the workforce such as doctors and farmers are saying that changes which target practices such as income sprinkling and passive investments, depicted by the Liberals as allowing for unfair advantages, will put their survival under threat.

The Liberals have also been supremely tone-deaf in their messaging, says Moody, in conversation with BNN’s Michael Hainsworth.

“There’s been a lot of damage done over the last two months, starting with the release of material on July 18th with some pretty offensive language,” says Moody, “effectively calling a lot of people tax cheats. A lot of people are still very angry at that language.”

Moody says that despite recent efforts to acknowledge the criticism, the Liberal government still has many in the tax and business communities deeply concerned. “The devil’s in the details,” says Moody. “Now we have these five very loosey goosey principles that were released [this past Tuesday], one day after the deadline of the submissions. We’re anxious to see some details.”

Last week, the government came out with a list of five key principles ostensibly meant to reassure small business owners that the new rules won’t hinder their businesses, including for good measure a special exemption for family farms, which won’t see the changes applied to the transfer of farms from one generation to the next.

But Moody claims that the whole revamping process needs to be restarted, saying that more input is needed from small business owners themselves who are going to be most directly impacted by the changes. “People in the tax community in general would like to see these proposals withdrawn completely,” says Moody. “And let’s start again [by asking] what are you really trying to get at here, what’s the mischief that ultimately is on the table?”

Many trace the impetus for the new tax strategy back to the Liberal party’s election platform in 2015 which involved a stated desire to restrict high-income business owners from using their Canadian-controlled private corporations (CCPCs) status to escape from paying their true income tax obligations.

“Many of the richest Canadians are unfairly exploiting the tax rules designed to help businesses thrive,” said Finance Minister Bill Morneau earlier this summer on the release of the proposed changes. “We know that businesses, including small businesses, help grow the Canadian economy. These tax advantages are in place to help these businesses reinvest and grow, find new customers, buy new equipment and hire more people.”

Morneau stated last week that the government won’t be extending the consultation period for the proposed tax changes any further.

More Cantech Analysts