Prime Minister Justin Trudeau signalled Wednesday he is open to compromise on his government’s plan to tighten the small business tax regime, but he pledged to largely stay the course as he looks to collect more revenue from some of the wealthiest Canadians.
In his opening address to Liberal MPs assembled in Kelowna, B.C., for a national caucus meeting, Trudeau said he believes in the plan to close tax “loopholes” some proprietors now enjoy but could be willing to alter its rollout to satisfy growing demand for tweaks to the proposals.
The current plan would curtail “income sprinkling” and end tax advantages for those who hold passive investments, such as stocks and real estate, in their small businesses.
“Speaking of tax changes, I want to be clear: people who make $50,000 a year should not pay higher taxes than people who make $250,000 a year. We are always open to better ways to fix that problem, but we are going to fix that problem,” Trudeau said.
Particularly sensitive
A Finance official, speaking on background, said the government is unwavering in its plan but will take time to consider feedback from a 75-day consultation process launched in July. There could be delayed implementation, or some adjustments to ensure there are no unintended consequences, for example.
The government is particularly sensitive to claims the proposals could disproportionately affect women. The Canadian Medical Association told CBC News Tuesday the tax changes could force female physicians to choose between their career and being a mother because they rely on income sprinkling to keep spouses at home to look after young children.
Before the prime minister’s speech, Liberals MPs broke out into regional caucuses to discuss issues ahead of Parliament’s return later this month. MPs were also briefed by Finance officials about how best to sell the proposed tax changes to their constituents.
Those officials also sought to clarify some misinformation that has spread since the plan’s launch. Importantly, the changes will be applied retroactively and the actual small business tax rate will not be increased.
Better message
But there are concerns from some MPs that the government has not executed the best sales job. “I think we need to do a better job at getting our message out about what we want to accomplish in this,” Manitoba Liberal MP Doug Eyolfson said.
“The whole intention of this was tax fairness for all but I think we need to give a better message. We don’t want to portray people as wanting to skip out on taxes or not paying their fair share; that was never our intention, particularly among the medical community.”
Eyolfson, an emergency physician for 20 years, said he thinks doctors are currently paying their fair share of taxes, and he regrets that many of his fellow doctors feel targeted by this plan.
“We want to ensure these concerns get passed on to the minister,” he said.