The Canadian Construction Association (CCA) is concerned that the federal government’s recently proposed tax reforms could have unintended negative impacts on small companies that make up a majority of the construction industry.
The CCA is one of 42 organizations from across Canada that have come together to form the Coalition for Small Business Tax Fairness. The idea behind the group is to provide a unified voice opposing the federal government's proposals that would change the way incorporated small businesses are taxed in Canada.
"I think that is what the major concerns are of the business community, the manner in which these proposals are being introduced, the indiscriminate application that these would have and the dire consequences this would have with respect to tax planning," explained Michael Atkinson, president of the CCA.
"Given the fact that 99 per cent of the companies active in the construction industry in Canada are small businesses, over 60 per cent are micro, this is a huge part of our membership. This is an issue that goes across industry and impacts many different businesses, professions, sectors."
A discussion paper issued in July by the federal government proposes new measures which, according to Atkinson, eliminate or restrict some of the longstanding tax planning measures that a lot of Canadian privately controlled companies have used for decades.
This includes the ways business owners can save on taxes including sharing income with family members, saving passive investment income and converting a corporation's income into capital gains.
The measures are currently legal and used by many independent business owners to reinvest in the business, ensure stability of the firm in leaner times or save for the retirement of the business owners, Atkinson explained.
"You're dealing with measures that have been around for decades and are perfectly legitimate means by which to tax plan," explained Atkinson. "The group that they're going after or the questionable transactions they're going after is one thing, but the measures they're proposing would hit everybody. My analogy is one person is fooling around inappropriately in the swimming pool and they kick everybody out."
Atkinson said the CCA was pleased the Canadian Federation of Independent Business (CFIB) started to mobilize a number of associations at the national level almost immediately after the discussion paper was released.
The coalition recently sent a letter to federal Minister of Finance Bill Morneau. The letter recommends the proposals be taken off the table and that meaningful consultations be launched with the business community to address any shortcomings in tax policy without unfairly targeting independent businesses.
On Sept. 5, the CFIB also planned to deliver 14,691 petition letters to MPs from business owners who are "concerned about the increased tax burden being placed on them by Ottawa," explains a release.
"We're looking forward and hoping that the government will heed the main asks of the coalition, which is essentially, first of all, get rid of that October deadline," Atkinson stated.
"We also want to sit down intelligently and calmly and understand the areas that give the gravest concern and see if we can together find a course of action which addresses those concerns without really hitting legitimate small businesses in a very difficult way."
He added the business community was insulted by the rhetoric that was used around this discussion paper when it was first released.
"I'm not suggesting the government purposely did this but some of the reaction we've seen in the small business community is 'how dare the government suggest we are a bunch of tax cheaters and how dare they suggest that somehow we're not paying our fair share,' " said Atkinson. "To suggest that they are somehow getting a free ride or because they're entrepreneurial as opposed to their neighbour who is a '9 to 5' employee is a bit ridiculous.
"I don't know too many employees that have to meet a payroll every week or every two weeks. I don't know too many employees who are in a situation in which not only are their corporate assets at risk, but often their personal assets because of the guarantees or the collaterals they have to provide in order to get an operating line or what is needed to do business."
The CCA plans to continue to urge the federal government to extend the deadline for comments on the matter and to engage in consultations with the interested parties.