Justin Trudeau, the newly minted Prime Minster of Canada, has followed the lead of certain of his Provincial counterparts, and issued Ministerial Mandate Letters, to each of the ministers responsible for Federal government ministries. As a general rule, the Ministerial Mandate Letters set the broad policy parameters for the respective Minister, are helpful for the public, to better understand to functions and priorities of each Ministry.
In that regard, some of you will recall our PM’s election campaign comments regarding small business and taxation:
“We have to know that a large percentage of small businesses are actually just ways for wealthier Canadians to save on their taxes and we want to reward the people who are actually creating jobs.”
[Justin Trudeau, in an interview with the CBC’s Peter Mansbridge, broadcast on Sept. 8].
In that regard, and according to the Minister of Small Business and Tourism Mandate Letter, the Minister shall:
“Work with the Minister of Finance as the small business tax rate reduction is implemented to ensure that it is used to support small businesses, rather than used to reduce personal income tax obligations for high-income earners.” [N.B. Emphasis added]
It would seem that the Prime Minister is intent on altering the utilization of small businesses and the taxation of same, from what until now had been entirely acceptable tax planning strategies by small business and the people that own them. In that regard, do he and Minister Chagger intend to eliminate, reduce or tax back deferred income, held within a corporation? Will Canada follow the US lead (which parenthetically, has an entirely different corporate tax regime) and introduce some form of Accumulated Earnings Tax? What would be the monetary threshold, and how will “excessive earnings” be determined? Do he and Minister Chagger have some other remedy or sanction in mind?
One thing is for sure. Given MP Trudeau’s commitment to running deficits for the next few years, he will be simultaneously looking for new forms of revenue. Perhaps small business is in his cross-hairs. Let’s hope the Minister focuses her energies on those matters that lead to job creation, and focuses much less on an increase to the tax burden borne by small business, being the job creation power house of our national economy.