Government Thanks Canadians for Helping Get Tax Fairness Right
October 17, 2017 – Montréal, Quebec – Department of Finance Canada
When you have an economy that works for the middle class, you have a country that works for everyone. As the Government of Canada lowers taxes for small businesses, it is taking action to ensure that unintended advantages are not being used by high-income and wealthy individuals to pay less than their fair share in taxes.
Finance Minister Bill Morneau today took part in an event at a small business in Montréal to thank Canadians who contributed to the consultation on tax planning using private corporations. Because of their contributions, the Government can strike the right balance to create a fairer tax system, while cutting taxes for small business.
Based on what it heard, the Government announced yesterday its intention to lower the small business tax rate to 10 per cent, effective January 1, 2018, and to nine per cent, effective January 1, 2019. To support this change, the Government also announced its intention to make changes to the tax system that will ensure that Canadian-controlled private corporation (CCPC) status is not used to reduce personal income tax obligations for high-income earners rather than to support small businesses to invest and grow.
Yesterday, Minister Morneau also announced the Government's intention to simplify the proposal to limit the ability of owners of private corporations to lower their personal income taxes by sprinkling their income to family members. The vast majority of private corporations, including corporations with family members who meaningfully contribute to the business, will not be impacted by the proposed income sprinkling measures. In addition, the Government announced yesterday it will not be moving forward with proposed measures to limit access to the Lifetime Capital Gains Exemption.
Since the launch of public consultations on July 18, Canadians have engaged in an important discussion on the Government's proposed measures to address tax planning using private corporations. Through town halls and roundtables held from Vancouver to St. John's, Ministers and Members of Parliament heard and carefully considered the views and perspectives of small business owners, farmers, fishers, professionals and experts.
In the coming days, the Government will announce further steps towards fairness for the middle class that will take into account this feedback.
"We made a promise to middle class Canadians that we would lower their taxes and make sure everyone pays their fair share. I would like to extend my sincerest thanks to Canadians for engaging in the cross-Canada dialogue that helped us strike the right balance and get this right. In the coming days, I look forward to announcing additional steps we will be taking to help ensure even greater tax fairness. With our commitment to lower the small business tax rate to nine per cent, our intent is to make sure the supports we provide to small businesses are used to help businesses buy new equipment, hire more workers and grow. In the coming days, I look forward to meeting with people in every region of the country as we provide more details on the way forward for fairness, a strong middle class and a thriving business community."
- Bill Morneau, Minister of Finance
- An increasing number of Canadians—predominantly high-income individuals—are using private corporations in ways that allow them to reduce their personal taxes or gain a tax advantage. In some cases, someone earning $300,000 with a spouse and two adult children can use a private corporation to get tax savings that amount to roughly what the average Canadian earns in a year.
- Only an estimated 50,000 family-owned private businesses are sprinkling income. This represents only a small fraction—around three per cent—of CCPCs.
- All corporations, including CCPCs, benefit from a combined general corporate tax rate that is 12 percentage points lower than Canada's largest trading partner, the United States.
- The Government intends to provide further support to small businesses in Canada through a further reduction of the federal small business tax rate to nine per cent.
- As a result, the combined federal-provincial-territorial average tax rate for small business would be lowered to 12.9 per cent from 14.4 per cent, by far the lowest in the G7 and fourth lowest among Organisation for Economic Co-operation and Development countries. Small businesses can retain more of their earnings to reinvest, supporting the growth of their business and job creation.
- In the course of the consultations, over 21,000 written submissions were received by the Department of Finance Canada.
- Reducing the Small Business Tax Rate
- Support for Small Business and Fairness for the Middle Class
- Income Sprinkling Using Private Corporations
- Support for risk taking and entrepreneurship
- Government Moves to Reduce Small Business Tax Rate and Support Fairness for the Middle Class
- Next Steps in the Government's Plan for Tax Fairness and a Strong Middle Class
- Minister Morneau Holds Town Hall and Facebook Live Event in Oakville
- Parliamentary Secretary to the Minister of Finance Brings Listening Tour to Regina
- Minister Morneau Discusses Tax Fairness With Standing Committee on Finance
- Minister Morneau Brings Listening Tour to Toronto
- Minister Morneau Brings Listening Tour to Fredericton
- Minister Morneau Brings Listening Tour to Halifax
- Minister Morneau Brings Listening Tour to Gatineau
- Ministers Morneau and Chagger Kick Off National Listening Tour With Small Business Owners
- Minister Morneau Announces Next Steps in Improving Fairness in the Tax System
- Minister Morneau Brings Message of Tax Fairness to Toronto Region Board of Trade
Media may contact:
Office of the Minister of Finance
613-369-5699 / 613-462-5469
Department of Finance Canada