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When​ ​federal​ ​Finance​ ​Minister​ ​Bill​ ​Morneau​ ​proposed​ ​changes​ ​to​ ​tax​ ​planning​ ​policies​ ​back​ ​in​ ​mid-July, the​ ​first​ ​feedback​ ​that​ ​we​ ​heard​ ​was​ ​from​ ​accountants.​ ​Amongst​ ​many​ ​other​ ​concerns,​ ​they​ ​were​ ​telling us​ ​that​ ​even​ ​if​ ​those​ ​changes​ ​were​ ​implemented​ ​at​ ​that​ ​time,​ ​it​ ​would​ ​be​ ​difficult​ ​to​ ​get​ ​their​ ​clients ready​ ​by​ ​the​ ​January​ ​1,​ ​2018​ ​deadline.​ ​Perhaps​ ​a​ ​surprise​ ​to​ ​Minister​ ​Morneau,​ ​changes​ ​to​ ​the​ ​3,300+ word​ ​tax​ ​code​ ​takes​ ​some​ ​time​ ​to​ ​consider​ ​and​ ​apply​ ​to​ ​each​ ​business.

When​ ​the​ ​proposals​ ​were​ ​first​ ​released​ ​we​ ​asked​ ​questions​ ​like:​ ​has​ ​an​ ​economic​ ​impact​ ​study​ ​been conducted​ ​on​ ​the​ ​proposed​ ​changes?​ ​Has​ ​government​ ​evaluated​ ​the​ ​increased​ ​compliance​ ​burden​ ​and financial​ ​cost​ ​to​ ​small​ ​businesses?​ ​Has​ ​government​ ​evaluated​ ​the​ ​increased​ ​cost​ ​and​ ​administration​ ​for CRA?​ ​How​ ​will​ ​the​ ​proposed​ ​changes​ ​be​ ​managed?  

Then​ ​we​ ​were​ ​reduced​ ​to​ ​asking​ ​for​ ​months:​ ​so​ ​what​ ​are​ ​the​ ​changes,​ ​exactly?  

Now,​ ​barely​ ​two​ ​weeks​ ​away​ ​from​ ​the​ ​government​ ​imposing​ ​the​ ​most​ ​disruptive​ ​tax​ ​changes​ ​in​ ​40​ ​years on​ ​Canadian​ ​businesses,​ ​the​ ​minister​ ​has​ ​provided​ ​some​ ​details​ ​on​ ​the​ ​final​ ​day​ ​of​ ​sitting​ ​for​ ​parliament in​ ​2017​ ​-​ ​providing​ ​a​ ​clear​ ​signal​ ​that​ ​the​ ​federal​ ​government​ ​does​ ​not​ ​want​ ​to​ ​answer​ ​for​ ​these changes​ ​anytime​ ​soon.​ ​The​ ​original​ ​proposals​ ​themselves​ ​are​ ​harmful​ ​to​ ​Canadian​ ​business,​ ​but​ ​the cavalier​ ​timing​ ​from​ ​July​ ​18​ ​until​ ​now​ ​is​ ​truly​ ​disheartening​ ​for​ ​business​ ​and​ ​the​ ​tweaks​ ​put​ ​forward​ ​by the​ ​government​ ​in​ ​November​ ​and​ ​this​ ​week​ ​have​ ​done​ ​precious​ ​little​ ​to​ ​alleviate​ ​these​ ​concerns.  

Mr​ ​Morneau​ ​should​ ​heed​ ​the​ ​advice​ ​from​ ​the​ ​Senate’s​ ​Standing​ ​Committee​ ​on​ ​National​ ​Finance​ ​in​ ​their report​ ​released​ ​on​ ​December​ ​13,​ ​2017.​ ​That​ ​group​ ​-​ ​made​ ​up​ ​of​ ​Conservatives,​ ​Liberals​ ​and Independents​ ​overwhelmingly​ ​agreed​ ​with​ ​small​ ​business​ ​that​ ​the​ ​proposals​ ​should​ ​be​ ​scrapped altogether.​ ​They​ ​also​ ​recommend​ ​a​ ​full​ ​review​ ​of​ ​Canada’s​ ​tax​ ​system,​ ​which​ ​business​ ​has​ ​been suggesting​ ​for​ ​years.​ ​At​ ​a​ ​bare​ ​minimum​ ​it​ ​is​ ​irresponsible​ ​for​ ​the​ ​government​ ​to​ ​introduce​ ​these changes​ ​without​ ​a​ ​completed​ ​economic​ ​impact​ ​analysis.

And​ ​the​ ​problems​ ​aren’t​ ​just​ ​limited​ ​to​ ​bad​ ​policy​ ​-​ ​process​ ​is​ ​as​ ​much​ ​of​ ​a​ ​concern.​ ​We​ ​recently​ ​learned from​ ​Auditor​ ​General​ ​Michael​ ​Ferguson​ ​that​ ​CRA​ ​is​ ​currently​ ​only​ ​able​ ​to​ ​field​ ​one-third​ ​of​ ​calls​ ​coming in​ ​from​ ​Canadians​ ​and​ ​are​ ​giving​ ​incorrect​ ​advice​ ​30%​ ​of​ ​the​ ​time​ ​-​ ​this​ ​is​ ​beyond​ ​alarming​ ​already.​ ​Now the​ ​government​ ​is​ ​proposing​ ​to​ ​increase​ ​the​ ​workload​ ​of​ ​CRA​ ​employees​ ​by​ ​making​ ​the​ ​tax​ ​code​ ​even more​ ​complicated​ ​and​ ​adding​ ​the​ ​responsibility​ ​of​ ​deciding​ ​what’s​ ​reasonable​ ​compensation​ ​for​ ​the spouse​ ​or​ ​child​ ​of​ ​a​ ​business​ ​owner.​ ​Oh,​ ​and​ ​did​ ​I​ ​mention​ ​that​ ​both​ ​Chief​ ​Justice​ ​Rossiter​ ​and​ ​former chief​ ​justice​ ​Rip​ ​of​ ​the​ ​Tax​ ​Court​ ​of​ ​Canada​ ​have​ ​said​ ​that​ ​the​ ​“reasonableness​ ​test”​ ​required​ ​for​ ​income splitting​ ​could​ ​lead​ ​to​ ​a​ ​higher​ ​volume​ ​of​ ​appeals​ ​from​ ​taxpayers,​ ​further​ ​clogging​ ​up​ ​the​ ​court​ ​system?
 
The​ ​government​ ​has​ ​tried​ ​several​ ​times​ ​to​ ​refine​ ​their​ ​proposals​ ​and​ ​their​ ​messaging,​ ​for​ ​example,​ ​the $50,000​ ​cap​ ​on​ ​passive​ ​income​ ​earned.​ ​The​ ​government​ ​keeps​ ​saying​ ​that​ ​this​ ​threshold​ ​will​ ​​only
​ ​ ​affect 3%​ ​of​ ​corporations.​ ​It​ ​is​ ​true​ ​that​ ​most​ ​small​ ​businesses​ ​won’t​ ​reach​ ​that​ ​figure,​ ​but​ ​the​ ​idea​ ​that​ ​small business​ ​would​ ​be​ ​happy​ ​that​ ​reforms​ ​would​ ​only​ ​affect​ ​the​ ​top​ ​3%​ ​of​ ​corporations​ ​is​ ​wrong​ ​headed. Small​ ​business​ ​relies​ ​on​ ​larger​ ​businesses​ ​as​ ​their​ ​customers​ ​through​ ​their​ ​supply​ ​chains​ ​and​ ​recognize the​ ​importance​ ​of​ ​large​ ​businesses​ ​as​ ​an​ ​economic​ ​driver.​ ​It​ ​matters​ ​if​ ​a​ ​company​ ​has​ ​500​ ​employees​ ​or 550;​ ​it​ ​matters​ ​if​ ​a​ ​large​ ​companies​ ​expands​ ​by​ ​5%.​ ​That​ ​all​ ​adds​ ​up.​ ​It’s​ ​how​ ​economies​ ​function​ ​and grow.  
 
The​ ​economy​ ​works​ ​best​ ​when​ ​all​ ​sectors​ ​and​ ​strata​ ​of​ ​the​ ​business​ ​community​ ​are​ ​firing​ ​on​ ​all cylinders.​ ​The​ ​relationship​ ​between​ ​different​ ​industries​ ​and​ ​size​ ​of​ ​business​ ​is​ ​symbiotic​ ​and​ ​integrated. In​ ​Fredericton,​ ​we​ ​are​ ​known​ ​as​ ​the​ ​Startup​ ​Capital​ ​of​ ​Canada​ ​and​ ​many​ ​of​ ​these​ ​startups​ ​rely​ ​on mature​ ​businesses​ ​for​ ​their​ ​seed​ ​funding​ ​and​ ​as​ ​early​ ​adopters​ ​of​ ​innovative​ ​technologies.​ ​Do​ ​we​ ​want to​ ​stifle​ ​this​ ​germination​ ​of​ ​the​ ​ecosystem?
 
People,​ ​capital​ ​and​ ​many​ ​business​ ​operations​ ​are​ ​all​ ​highly​ ​mobile​ ​today.​ ​Our​ ​region​ ​is​ ​already struggling​ ​with​ ​that​ ​very​ ​issue​ ​as​ ​we​ ​feel​ ​the​ ​pull​ ​to​ ​other​ ​parts​ ​of​ ​the​ ​country​ ​that​ ​otherwise​ ​have​ ​a better​ ​economy​ ​and​ ​more​ ​opportunities​ ​for​ ​people​ ​and​ ​businesses​ ​-​ ​these​ ​proposed​ ​reforms​ ​are​ ​likely to​ ​exacerbate​ ​and​ ​accelerate​ ​the​ ​problem​ ​as​ ​we​ ​are​ ​less​ ​able​ ​to​ ​absorb​ ​yet​ ​another​ ​hit​ ​to​ ​our businesses.​ ​The​ ​Atlantic​ ​Region​ ​and​ ​Canada​ ​as​ ​a​ ​whole​ ​are​ ​facing​ ​difficult​ ​and​ ​complex​ ​global​ ​issues,​ ​the last​ ​thing​ ​we​ ​need​ ​is​ ​to​ ​create​ ​more​ ​challenges​ ​for​ ​ourselves​ ​and​ ​reasons​ ​for​ ​business​ ​investment​ ​to leave.  
 
It​ ​is​ ​evident​ ​from​ ​the​ ​ever-increasing​ ​complexity​ ​of​ ​the​ ​tax​ ​code​ ​that​ ​tax​ ​policy​ ​has​ ​become​ ​a​ ​political tool​ ​and​ ​it​ ​really​ ​shouldn’t​ ​be.​ ​The​ ​Senate​ ​report​ ​shows​ ​what​ ​vastly​ ​different​ ​conclusions​ ​are​ ​reached when​ ​partisan​ ​politics​ ​is​ ​removed.​ ​If​ ​the​ ​government’s​ ​concern​ ​is​ ​really​ ​fairness,​ ​then​ ​let’s​ ​have​ ​a​ ​full conversation​ ​and​ ​review​ ​through​ ​that​ ​lens.​ ​There​ ​is​ ​no​ ​chance​ ​that​ ​more​ ​tinkering​ ​and​ ​cherry-picking certain​ ​parts​ ​of​ ​tax​ ​policy​ ​will​ ​lead​ ​to​ ​the​ ​road​ ​to​ ​fairness​ ​-​ ​there​ ​are​ ​just​ ​too​ ​many​ ​moving​ ​parts​ ​to​ ​be able​ ​to​ ​do​ ​this​ ​on​ ​a​ ​piecemeal​ ​basis.​ ​So​ ​let’s​ ​hit​ ​the​ ​pause​ ​button​ ​on​ ​the​ ​proposals,​ ​engage​ ​in​ ​a​ ​full review​ ​through​ ​a​ ​Royal​ ​Commission​ ​and​ ​ensure​ ​that​ ​any​ ​new​ ​proposals​ ​should​ ​be​ ​straight-forward, simple​ ​and​ ​efficiently​ ​implemented​ ​by​ ​CRA​ ​and​ ​easily​ ​administered​ ​by​ ​small​ ​business.​ ​Oh​ ​and​ ​do​ ​try​ ​to let​ ​business​ ​know​ ​what​ ​the​ ​rules​ ​are​ ​before​ ​we’re​ ​supposed​ ​to​ ​comply​ ​with​ ​them.

 

Krista Ross is CEO of the Fredericton Chamber of Commerce, ​a​ ​nationally​ ​accredited​ ​organization​ ​with nearly​ ​1,000​ ​members,​ ​is​ ​an​ ​active​ ​business​ ​organization​ ​engaged​ ​in​ ​policy​ ​development​ ​and​ ​advocacy that​ ​affects​ ​the​ ​competitiveness​ ​of​ ​our​ ​members​ ​and​ ​the​ ​Canadian​ ​business​ ​environment.​ ​The Chamber’s​ ​vision​ ​is​ "Community Prosperity Through Business".