OTTAWA _ A big Canadian player has quietly picked up his chips and is heading for the exit amid all the tumult over the Trudeau government’s controversial tax proposals.
A business owner has informed John Manley, the head of an organization representing Canada’s largest corporations, that he’s moved billions of dollars outside the country since the Liberals announced their tax changes in mid-July.
The government’s proposals to eliminate several tax incentives have awakened a large contingent of vocal opponents from numerous backgrounds _ from the small business community, to farmers, to tax planners, to professionals like doctors and lawyers. Even backbench Liberal MPs have publicly expressed their concerns.
In the background, the Liberals’ proposed tax reforms are also a deep concern for a much-smaller, silent group of Canadians: wealthy business leaders.
Manley, a former Liberal finance minister in the Chretien government, said the elements of the government’s plan to tighten rules on passive investment portfolios and the transfer of family businesses have created worries for some members of his organization, the Business Council of Canada.
The financial concerns have been compounded by the government’s accompanying messages that Manley believes have “vilified” higher-income Canadians.
Many of his members, he added, have been taken aback by rhetoric that they see as pitting the middle class against the wealthy.
“I don’t get it at all _ I thought that one of the successes of Prime Minister (Justin) Trudeau was that he was the unifier, he was bringing people together,” said Manley, who noted the broader economy could feel the sting of losing too many big job creators.
“There’s lots of journeymen hockey players in the NHL, but you still want to have some (Connor) McDavids and (Wayne) Gretzkys and people that are stars.”
Manley pointed to one example where a successful business owner has decided to leave Canada with “billions of dollars.”
On the advice of tax professionals, he said the individual decided to move the money primarily because of the impacts the reforms could have on his family through changes related to estate planning.
There’s a notion that other big players could soon head for the exits, Manley said.
“You won’t know about it because they’re not going to buy ads or report it _ they’ll just go.”
Manley’s group is calling on the government to hold off on the proposed changes for now to allow for a broader review of the tax system that examines additional goals like making the entire structure less complex.
Failing that, he would like to see the feds fix any unintended consequences from the current plan on the table.
Finance Minister Bill Morneau first released the three-part tax reform plan in the middle of the summer. He argued it would level the playing field for Canadians.
The package includes restrictions on the ability of business owners to lower their tax rate by sprinkling their income to family members in lower tax brackets, even if those family members do no work for the business.
Morneau also proposed limiting the use of private corporations to make passive investments in things like stocks or real estate. Another change would limit business owners’ ability to convert regular income of a corporation into capital gains, which are typically taxed at a lower rate.
The government also gave Canadians a 75-day consultation period, ending Oct. 2, to weigh in on the proposals. Morneau has insisted the government will listen to concerns before it tables legislation.
Trudeau has stood firmly by the proposed reforms and has stressed they are about making the system fairer, rather than generating revenue.
The goal, he said earlier this week, is to stop a system that “encourages wealthy Canadians to use private corporations to pay lower tax rates than the middle class.”