You have likely read reports about the very broad income tax proposals released by the federal Department of Finance on July 18, 2017, relating mostly to the taxation of private businesses.
The new proposals are wide ranging and among other things may result in very high imposition of tax on income earned through a corporation in some cases, especially where the corporation earns passive income such as interest or dividends. You may have seen examples of total tax rates such as 73% or even 93%, depending on the facts (although these rates assume that people will not amend their current plans and structures to take into account the proposals). The proposals will also affect the capital gains exemption for small business shares, and other planning.
The Department of Finance has requested input from the public on these proposals, and is accepting comments until October 2. Many observers believe that the government is determined to make these changes and will basically ignore the storm of criticism currently being unleashed from many sectors of the business world. It remains to be seen whether the public’s input will have any impact. We are also seeing significantly increased interest expressed by high-income individuals in leaving Canada to avoid crushingly high tax rates.
We will find out in due course the extent to which these proposals will actually be implemented. Since this Liberal government has a majority in Parliament, if the government decides to proceed there is little that can be done to stop it unless the Senate refuses to pass the changes.
