In response to Finance Canada's Public Consultation on proposed tax changes for private corporations, CFA made a submission in advance of today's deadline, which can be found here.
The proposals seek to close the following "loopholes" in the federal tax system that they say disproportionately benefit wealthy Canadians:
- Sprinkling income using private corporations - a corporation "paying" family members who are subject to lower personal tax rates.
- Holding a passive investment portfolio inside a private corporation - corporate income tax rates, which are generally much lower than personal rates, facilitate the accumulation of earnings that can be invested in a passive portfolio.
- Converting a private corporation's regular income into capital gains - income is normally paid out of a private corporation in the form of salary or dividends to the principals, who are taxed at the recipient's personal income tax rate. In contrast, only one-half of capital gains are included in income, resulting in a significantly lower tax rate on income that is converted from dividends to capital gains.
CFA's submission outlines the fact that
franchisees are the backbone of the communities they serve, employing people of all backgrounds, supporting local initiatives, and helping grow the economy. As business owners, they assume significant risk, but have been able to achieve success through hard work and support from family members. Simply stated, CFA believes the changes being proposed by the Minister will hurt Canadian franchisees.
Based on the collective concerns of our membership, CFA's recommendations are as follows:
1. Reverse the proposals set out by the Finance Minister;
2. Continue Consultations outside of the original 75-day period; and,
3. Ensure changes to existing tax policies do not adversely affect those who it intends
to help, i.e., middle-class earners, small business owners, etc.
Action Required - Share this letter with your Franchisees before public consultations end today!
To ensure the Canadian franchise industry's voice is heard, we have developed a letter for franchisees from across Canada to send to their local Member of Parliament (MP).
Please distribute this email to your franchisee network and ensure the voice of the franchise sector is heard before the consultations end today!
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