Canada’s taxation system has been “band-aided” together for almost six decades, and a Senate committee is open to recommending that the finance minister establish a Royal Commission with the aim of rebuilding it, according to one of its members.
If the Red Chamber’s Standing Committee on National Finance doesn’t make that recommendation, it will at the very least note in its report to Finance Minister Bill Morneau next month that businesses and organizations across the country want reform, Sen. Raynell Andreychuk said.
“They’re not, as you heard, averse to changes to taxes,” the Saskatchewan senator said. “But they need certainty, and the best way is to look at something that’s been in place since the ’60s. That’s a long time. The world has changed.”
Eight of the committee’s 13 members were in Saskatoon on Wednesday for the 19th in a series of consultations announced in late September, amid fierce backlash from small businesses and physicians to corporate tax changes Morneau proposed over the summer.
The changes would restrict individuals from reducing their tax burden by “sprinkling” corporate income among family members, neutralize the advantages of “passive” investments within a corporation and prevent income from being converted to capital gains.
The government has since offered businesses an olive branch in the form of a reduced corporate tax rate and tweaks to Morneau’s changes, but that has not diminished the deep uncertainty felt by businesses, three organizations told the committee.
North Saskatoon Business Association executive director Keith Moen likened the changes to “using an RPG to kill a fly,” while Greater Saskatoon Chamber of Commerce CEO Darla Lindbjerg added that uncertainty dampens investment, which is the last thing the economy needs.
“Businesses are sitting in limbo with more questions than answers,” Moen told the committee
Speaking with a reporter afterwards, Saskatchewan Chamber of Commerce CEO Steve McLellan emphasized that clarity is more important than lower taxes.
“I don’t mind paying taxes; I want to make sure that they’re fair and transparent,” McLellan said. “So let’s invest some money now on an expensive, significant effort (to reform the tax system) so that the outcome would be a benefit for us for decades.”
Many business and industry groups were quick to express concern about the proposed changes, a response that culminated in about 250 entrepreneurs protesting in the middle of Saskatoon’s downtown core in late September.
Sen. Richard Neufeld told the committee that the concerns raised in Saskatoon were “not much different” from those expressed in other cities. Andreychuk said she was sympathetic to those concerns because the tax system is a confusing patchwork in need of updating.
“All of a sudden the government says, ‘You’re using loopholes,’ with the tone of it (being) improper or illegal … The word ‘loopholes’ implies that it’s unfair or something that shouldn’t happen … They feel like they’ve been marginalized and condemned.”
Chloé Luciani-Girouard, a spokeswoman for Morneau, said in an email that the finance minister looks forward to the committee’s final report. That document is expected to be submitted on Dec. 15.