Federal government proposes changes to tax law for small businesses
Last month, Finance Minister Bill Morneau released a discussion paper outlining potential measures that would affect tax planning strategies involving the use of private corporations. The government is currently receiving submissions and feedback on the proposed measures. The consultation will be open for a period of 75 days with a deadline for submissions of October 2, 2017.
It is important to note that at this time, this is a consultation document and not legislation. The full discussion paper is available here.
What are the consultation’s areas of focus?
There are three tax planning strategies that are being reviewed as part of this consultation:
- Sprinkling income using private corporations
- Holding a passive investment portfolio inside a private corporation
- Converting a private corporation’s regular income into capital gains
Several accounting firms have developed bulletins that summarize the proposals:
- Tax Planning Using Private Corporations (Deloitte)
- Finance Targets Private Company Tax Planning (KPMG)
- A Detailed Review: The Government’s Private Company Consultation Paper (BDO Canada)
What does this mean for pharmacists?
It is estimated that between 20-40% of pharmacies in Canada are independently owned and 78% of Canadian pharmacies are classified as small businesses. Additionally, many other non-owner pharmacists are self-incorporated and could be affected by the changes. Pharmacist owners often incur considerable risk, invest substantially to help create jobs, and do so without having access to benefits or a pension.
While each pharmacy will be structured differently for tax purposes, the changes as they are proposed, will likely have a significant impact on small businesses and small business owners, many of which are pharmacies.
What is CPhA doing?
CPhA is currently developing its response to address the issues that have been raised by the discussion paper. While these proposed measures will undoubtedly affect many independently owned pharmacies, this is an issue that will affect many if not all small businesses in Canada. As this is a highly technical discussion paper, we are focusing our efforts on the following:
- Working with other organizations to identify common concerns, and align advocacy efforts
- Commissioning an analysis of the proposed tax changes by legal and tax planning experts
- Working with provincial pharmacy associations to understand the impact of these changes
- Developing a formal response to the discussion paper
- Informing members about the consultation and encouraging members to reach out to their local Members of Parliament
What you can do
Reach out to your MP
If you are concerned about the proposed changes, we encourage you to contact your local Member of Parliament to express your concerns. It is important that MPs hear from a variety of different businesses and stakeholders who would be affected, should these changes move ahead.
Members of Parliament will be in their ridings for the next several weeks, until the House of Commons returns on September 18. Providing a local perspective on how these potential changes could affect your business, your employees, and your community can have an important impact on how the government proceeds.
Participate in the consultation
Pharmacists can also participate directly in the consultation by sharing their perspectives with the Department of Finance. Submissions can be sent to: firstname.lastname@example.org.
Speak up on social media
Consider voicing your concerns via social media. This can be an effective way to amplify a common cause.
For more information about how you can share your perspective, please contact email@example.com.