Canada’s Trudeau takes heat on proposed small biz tax concessions

Canadian prime minister Justin Trudeau and his finance minister Bill Morneau have  sought this week to placate criticism of the government’s controversial tax reform proposals, pledging, among other things, to cut the small business tax rate to 9% by 2019.

Currently small businesses in Canada pay 10.5%.

Trudeau, pictured left, attended a press conference on Monday, alongside the embattled Morneau, at which a number of sweeteners were unveiled that were designed to appeal to small business owners, many of whom had made known their objections to tax reform proposals published in June.

During the course of the press conference, the prime minister sought to draw the fire away from Morneau, by insisting on answering questions addressed to the finance minister.

In addition to his proposal to cut the small business tax, Morneau also announced that the government will not now be moving to limit access to the lifetime capital gains exemption, as had originally been proposed, though he reiterated its determination to clamp down upon the practice of “income sprinkling”, reports in the Canadian press noted.

Income sprinkling is when business owners split the income of their business among their family members, and in so doing are able to lower their income tax rate.

Morneau described this technique as “unfair”, saying that the practice was being abused by “high-income individuals” that were making use of private corporations in such a way as to gain a tax advantage not available to other citizens.

He clarified that it was abuse of the system that he was determined to target, saying that family members who make “genuine contributions” to a business would not be affected.

But the minister himself has been under fire as a “high-income individual”, charged by the press with not being transparent about his connections to a “private corporation” that owns a private villa in France.

It is, say Morneau’s critics, a tax-efficient arrangement that allows favourable treatment for what is simply a privileged family asset.

The Toronto Sun said on Monday: “It’s a set-up that gives Morneau’s family a tax advantage with regard to inheritance.

“Conflict of Interest and Ethics Commissioner Mary Dawson apparently knew of the villa, but not of the private corporation.”

At Monday’s press conference, reporters sought to question Morneau about his personal tax arrangements, but Trudeau stepped in to field the questions.

“My questions are actually for Minister Morneau,” one reporter said.

“I’ll take them,” Trudeau responded. “You’ve got an opportunity to chat with the prime minister. I’m happy to be here.”

Another reporter, from the Globe and Mail, asked to direct the questions to Morneau; again, Trudeau refused.

“You have to ask the question of me first, because you get the chance to talk to the prime minister.”

The press conference caused a Twitter storm Monday night, with many Canadians angry about the finance minister’s apparent oversight in not declaring his family-villa corporation.

As reported, the Canadian government launched a consultation in June into whether the use of private corporations by wealthy individuals should be restricted.

Eugene Costello
Eugene Costello has been a journalist for some 20 years, and has written for a wide variety of UK and international newspapers and magazines.

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