Liberals will offer measure to soften small business tax changes, source says – Politics

The Liberal government is set to offer a measure to Canadians affected by its proposed tax changes that would make the controversial reforms more palatable, CBC News has learned.

“We are not just going to take, take, take,” a senior government official, speaking on background, told CBC News. “We’re going to give something as well.”

The offering — the proverbial spoonful of sugar to make the medicine go down — would be part of the final proposals presented after the consultation period ends Oct. 2.

The official would not speculate on what the government will offer as that sweetener.

The Liberal election campaign platform linked the party’s intentions to go after Canadians who use private corporations to reduce their personal income taxes with its promise to cut the small business tax rate to nine per cent.

“As we reduce the small business tax rate to nine per cent, from 11 per cent, we will ensure that Canadian Controlled Private Corporation (CCPC) status is not used to reduce personal income tax obligations for high-income earners rather than supporting small businesses,” the platform says on page 80.

The Liberals froze the small business tax rate at 10.5 per cent.

Trudeau speaks at a news conference in Ottawa on Tuesday. (Sean Kilpatrick/Canadian Press)

Both Prime Minister Justin Trudeau and Finance Minister Bill Morneau have indicated the government is open to tweaks of the proposed tax reforms, particularly to address any unintended consequences.

The government says its aim is to target high-income Canadians who incorporate in order to reduce their taxes through one or more of three currently legal practices: income sprinkling; passive investments; and converting business profits into capital gains instead of paying them out as dividends or salaries.

The Liberals want to stop the use of income sprinkling — when high-income business owners divert some of their income to family members who are taxed at a lower rate — even when those relations aren’t involved in the business. The Finance Department estimates about 50,000 families would be affected by the proposal to end that practice.

One of the most contentious proposals is to limit business owners and professionals who incorporate from holding their business income within the corporation, shielding it from a higher personal tax rate, and not reinvesting it in the business.

Finally, the Liberals want to prevent people from converting their private…

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