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Small business owners say they are unfairly targeted by proposed tax changes

Small business owners say they are unfairly targeted by proposed tax changes
From CBC - August 13, 2017

Don Paton spends most of his days pricing new jobs around the factories and industrial sites of Hamilton,or in hands-on workmaking the electrical connections for the cranes his company installs and repairs.

The rest of his time he spends at a computer, usually tackling administrative workfor his business, Ontario Crane Service. But last week he sat down to give Bill Morneau, Canada's finance minister, a piece of his mind.

"To me it's like, they are trying to pit one part of society against the other part. Anybody who owns a business is a bad person, because they have got money in the bank, or they have got a rainy day fund," he says.

His gripe is the federal government's proposal to close what it calls tax loopholes thatprivate businessesuse. Practices, the government's literature says, used to "gain unfair tax advantages."

Paton, and a growing number of business owners across the country, disagree.

3 changesconsidered

Last month, Morneau launched a 75-day consultation period for three proposed changes:

The first two measures are attracting mounting criticism.

Passive investment income

Money left "passively" invested within the business, Paton says, has an important purpose. "They want me to take that cash out of the businessso they can take more tax off it, and meanwhile if I hit a rough patch or a downturn I am going to have to go to the bank and borrow that money and pay interest."

Left in the business, the money is subject to the relatively lower small business tax rate, allowing Patonto invest a largersum. But he bridles at the suggestion of unfairness.

If he was an employee, he points out, there would be layers of government protection, including labour laws mandating severance payments, between him and the business cycle.

But running his own business, it's his job to make sure he can still pay his five employees through a downturn. That sheltered investment is not necessarily just for his own benefit.

Income sprinkling

Anger spreading

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