Dear Minister Morneau,
I am writing on behalf of the Business Council of Canada to express our views on the proposed measures outlined in your Tax Planning Using Private Corporations consultation paper.
The Business Council strongly supports efforts to improve the fairness and efficiency of Canada’s tax system. Unfortunately, the measures under consideration would make the tax system even more complicated than it already is. Furthermore, some of the proposed changes would have significant unintended consequences that would discourage investment and job creation.
As we have noted previously in pre-budget submissions, Canadian tax legislation has been subjected to a series of piecemeal revisions over the past 50 years. As a result, the tax system has become increasingly unwieldy and less efficient. Indeed, it could be argued that successive governments have created the very problem the proposed measures now aim to address by widening the gap between personal and small business tax rates.
Rather than making incremental changes to an already complicated tax system, now is the time for comprehensive review aimed at strengthening fairness and efficiency. The best way to achieve both objectives is to broaden the tax base and lower rates. Of equal importance is the need to ensure that the tax system does not favour certain kinds of businesses over others.
If anything, the current set of proposals would reduce Canada’s tax competitiveness. The measures put forward in the consultation paper are far too broad and have created significant uncertainty for entrepreneurs, large private corporations and subsidiaries of multinational corporations. Our specific concerns are outlined in the attachment.
Minister, we urge you to act quickly to provide assurances that Canada will remain an attractive and welcoming environment for entrepreneurs and business owners. As you know, some have already made the choice to move their money out of the country and sever their residential ties to Canada rather than risk being subjected to tax rates that can only be described as punitive. This trend, if allowed to continue, will have serious implications for innovation, job creation and economic growth.
We further recommend that the government extend the consultation period and undertake a detailed economic analysis of the impact on both investment and growth.
I would welcome an opportunity to discuss this with you at your earliest opportunity.
February 12, 2024
February 5, 2024