This presentation discusses many issues facing small businesses across Canada. The federal government has decided that small businesses do not pay enough taxes as such introduced reforms.

1. CANADA SMALL
BUSINESS IS UNDER
ATTACK BY
GOVERNMENT
BY: PAUL YOUNG CPA, CGA
DATE: JANUARY 9, 2019

2. PAUL YOUNG - BIO
• CPA, CGA
• Academia (PF1, FA4 and MS2)
• SME – Risk Management
• SME – Close, Consolidate and Reporting
• SME – Public Policy
• SME – Emerging Technology
• SME – Financial Solutions
• SME – Business Process Change
• SME – Supply Chain Management
Contact information:
Paul_Young_CGA@Hotmail.com

3. INTRODUCTION
Small business is the back bone of the economy in Canada. Approximately 80% of all new jobs are
related to small business.
Any changes either to taxation or other economic policies could influence how businesses start up
and operate in Canada.
Small business is the life blood for Canada. The liberals have called many small business owners
tax cheats
The investment community has warn Liberals to walk slowly with tax changes as part of
ensuring Canada has a competitive tax system - https://globalnews.ca/news/3741638/canadian-
tech-ottawa-trudeau-small-business-taxes/. Tax changes along with other policies could lead to a
brain drain to other countries like the USA

4. AGENDA
• Employment
• Issues facing small business
• Small business breaking point
• Hiring and capital spending
• Issues facing Government
• Taxation (Who pays what)
• Canadian Manufacturing / Small Business Tax Proposal
• CFIB / Small Business Tax Proposal
• Justin Trudeau / Small Business
• Small business blogs
• Tweet / Small Business

5. EMPLOYMENT / CANADA
Source – Stats Canada
Approximately 80% of new jobs are
created by small business

6. NEW TAX PROPOSAL
Source - http://business.financialpost.com/news/economy/newsalert-liberals-to-trim-small-business-tax-rate-to-stanch-political-bleeding-2 or https://home.kpmg.com/ca/en/home/insights/2017/11/finance-targets-private-
company-tax-planning.html https://assets.kpmg.com/content/dam/kpmg/ca/pdf/tnf/2017/ca-highlights-of-the-2017-fall-federal-economic-update.pdf or https://globalnews.ca/news/3802082/canada-tax-changes-small-
business/ or https://www.cpacanada.ca/en/connecting-and-news/news/professional-news/2017/july/finance-canada-consultation
Dividend Tax
Area of Focus Tax Rate What will be done
Income Sprinkling Owners will have to
prove people are
working for the
business
Passive Investment 73% $50, 000 cap per year
Capital Gains unchanged

7. ISSUES FACING SMALL BUSINESS
Policy Rate Impacted Areas Change % Link
Minimum Wage • $14.00 (2018) and $15
(2019)
• $13.60 (2017) and
$15.00 (2018)
ON, AB • Ontario minimum
wage hike 22% over
one year
• Alberta minimum
wage hike 20% over
one year
https://beta.theglobeandmail.com/re
port-on-business/alberta-and-
ontario-increase-minimum-wage-as-
they-aim-for-
15/article36450596/?ref=http://www.
theglobeandmail.com&
Hydro Rates Rates vary All Provinces • Ontario has seen 81%
increase in hydro
rates since 2010
https://beta.theglobeandmail.com/re
port-on-business/small-business/sb-
managing/small-business-owners-
anger-soaring-about-ontario-
electricityprices/article33344417/?re
f=http://www.theglobeandmail.com
&
Carbon Taxation • Trudeau said the
proposed price on
carbon dioxide
pollution should start
at a minimum of $10 a
tonne in 2018, rising
by $10 each year to
$50 a tonne by 2022.
• AB, BC, ON and PQ
have carbon
pricing/taxation
• Rest of the provinces
will implement carbon
tax in 2018
• Consumer goods cost
could go up between
5% to 8%
http://www.cbc.ca/news/politics/cana
da-trudeau-climate-change-
1.3788825

8. ISSUES FACING SMALL BUSINESS
Policy Rate Impacted Areas Change % Link
CPP Hikes All provinces • 3% per annum hike to
premiums
http://www.fin.gc.ca/n16/data/16-
113_3-eng.asp or
https://twitter.com/CFIB/status/844
649743213117440
Small Tax Proposal
• Capital Gains
• Wages
• Investment Income
All provinces https://www.bdo.ca/en-
ca/insights/industries/agriculture/ho
w-the-proposed-tax-changes-will-
impact-canadian-farmers/
Property Taxes • Various All provinces • 2% to 5% change https://beta.theglobeandmail.com/re
port-on-business/small-business/sb-
managing/calgary-mayor-naheed-
nenshi-risks-losing-citys-small-
businesses/article36353738/?ref=htt
p://www.theglobeandmail.com&
Access Capital
• Loans
• Grants
• Serie A financing
• Corporate Tax Rate • 10.5% Federally
• 10% (2018)
• 9% (2019)
• 4.0% (average
provincial rate)
http://www.taxtips.ca/smallbusiness
/corporatetax/corporate-tax-rates-
2017.htm or http://www.cfib-
fcei.ca/english/article/9728-cfib-
welcomes-reinstatement-of-small-
business-tax-cut.html

9. CFIB AND CARBON TAX
Source - https://www.newswire.ca/news-releases/federal-carbon-tax-plan-fails-fairness-competitiveness-tests-for-small-business-
698334331.html

10. PASSIVE INCOME TAX RULES – PROPOSED
CHANGES
Source - https://www.bdo.ca/en-ca/insights/tax/tax-articles/implications-of-the-governments-tax-changes-on-the-technology-sector/

11. BUSINESS CONFIDENCE
Source - https://tradingeconomics.com/canada/business-confidence

12. IS SMALL BUSINESS AT THE BREAKING
POINT?
• New Taxation Proposal focuses on wealth
• Hikes to payroll taxes
• Hikes to minimum wage
• Soaring hydro costs
• More and more regulations

13. ISSUES FACING GOVERNMENT
• All government are struggling to provide level services with slow economic
growth
• Governments are looking for ways to raise taxation
• Income inequality
• High youth unemployment
• Aging population
• Income distribution

14. TAXATION (UNDERSTANDING WHO PAYS
WHAT)
Radical shift to the left
Source -
http://business.financialpost.com/personal-
finance/taxes/heres-what-the-wealthiest-of-
the-wealthy-in-canada-earn-and-pay-in-
taxes

15. CANADIAN MANUFACTURING/SMALL
BUSINESS TAX
Source - http://www.canadianmanufacturing.com/manufacturing/tax-reform-devastating-small-manufacturers-cme-says-202423/
“Manufacturers are urging the government continue to encourage entrepreneurship, growth and investments by
revisiting the proposed changes,” Dennis Darby, president and CEO of CME, said in a statement. “We are
suggesting the government does this by working towards longer-term and more comprehensive reforms to create
a tax system that is simple and equitable.”
While CME said it is committed to finding solutions that deter tax-avoiding behaviour, it added that rewarding
entrepreneurship, innovation and risk-taking should also be a priority.
After assessing the proposed changes, the association is encouraging the government to continue allowing
spousal income splitting, but eliminate the practice for children under 24 years of age.
“We are also proposing the government creates a tax credit for CCPCs that allows them to claim 110 per cent of
their labour and capital expenditures against taxable income,” CME said. “This would lower the company tax
burden and encourages employment and investment but only for companies that are not tax-avoiding shells.”
The tax issue is expected to crop up again this week when Prime Minister Justin Trudeau meets with his provincial
counterparts.

16. CFIB AND SMALL BUSINESS TAX
PROPOSAL
Small Business Tax
Source - https://globalnews.ca/news/3779935/small-
business-tax-changes-cfib/
However, the changes might very well affect middle-income entrepreneurs as
well, by creating a pile of new, complex tax rules, Global News has heard from
tax accountants. That alone could be an important hurdle for smaller
businesses.
According to the CFIB, the cost of complying with existing rules is already
disproportionately higher for smaller businesses. Companies with fewer than
five employees spend over $6,600 to comply with regulations. For companies
with more than 100 employees, on the other hand, that tab drops to around
$1,400 per employee.

17. EMPLOYMENT AND SMALL BUSINESS
• New tax proposal by the federal government could take cash out of the hands of small business
• Small business may not expand including hiring of staff
• No new investment in capital equipment

18. INCOME GROWTH

19. TRUDEAU AND SMALL BUSINESS TAX
• The lowering of the GST rate was
judged the “second largest income
inequality improving measure
instituted throughout the 2005-2013
period, second only to the highly-
distributive Working Income Tax
Benefit,” the PBO said.
https://globalnews.ca/news/1356467/
tax-cuts-since-2005-net-canadians-
30b-pbo/

20. INCOME SPRINKLING – NIGHTMARE
Trudeau was warned not to make changes to small business tax policies and chose too. Many large corporations start
out in basements and/or small offices before they hit the big time. Part of their ability to expand their business is
through small business tax policies. Trudeau seems to not grasp how capital flows in Canada.
“When the government replaced the income splitting rules for private corporations, they could have made it simple. Instead,
the new package is complex and pages are filled with the new rules, lengthy definitions and exemptions to the rules.
Basically what the new rules now require is that family members prove that their contributions to the family business are
meaningful enough to get the dividends they receive. I ”
https://quadrantaccounting.ca/ottawa-has-turned-income-splitting-rules-into-an-absolute-nightmare-for-small-
businesses/#.W8RwMINw4BM.twitter
• Income Sprinkling rules then have to be reviewed by CRA. Tying up CRA auditors doing these test means
work cannot be done on other areas like transfer pricing or closing down tax shelters or underground
economy - https://nationalpost.com/news/politics/auditor-general-says-canada-revenue-agency-takes-too-
long-to-respond-to-tax-complaints-and-its-costing-us or https://www.cbc.ca/news/politics/cra-tax-avoidance-
evasion-1.4787781
• There are lack of resources including technology that puts restrictions on the ability of the CRA to collect
past due amounts and/or uncovered tax cheats - https://www.theglobeandmail.com/news/national/canada-
revenue-agency-expects-to-track-down-400-million-in-tax-crackdown/article34124570/

21. LIBERAL TAX CUT
Source -
https://www.pressprogress.ca/3_reasons_why_the_midd
Facts:
• Two-thirds of Canadians
who earn less than $45,000
see no benefit
• Canada's wealthiest 10% will
get half of all the benefits
from the "middle class tax
cut“
• The new tax changes will not
raise any money
Impact to the economy
• Provincial policies like hydro will eat into any savings
• Carbon Tax -
http://business.financialpost.com/commodities/energy/
ottawas-carbon-tax-plan-to-shrink-economy-by-3-
billion-hurt-loonie-in-2018-study
• Hikes to CPP will eat into tax cut savings
• Elimination of boutique tax credits for fitness,
textbooks, transit. etc.
• Small Business Tax Proposal
• Reducing the TFSA from 10,000 to 5,500
• Tax cut is not revenue neutral -
http://business.financialpost.com/personal-
finance/taxes/finance-minister-bill-morneau-says-
liberals-moving-ahead-with-middle-class-tax-cut-
higher-rate-for-wealthy

22. BLOG #1 – SMALL BUSINESS
• Morneau also talk dead cash, right? I have savings which is set up for purchases down the road. What's stopping Morneau going after my
savings?
• Harper had it right that was with TFSA accounts to encourage people to save. The fact was TFSA are being used by many people including
owners in small business. http://business.financialpost.com/personal-finance/tfsa/exclusive-canadians-maxing-out-their-tfsas-from-all-walks-of-
life
• Trudeau and his party condemned people for not saving enough moneys - https://www.liberal.ca/realchange/justin-trudeau-on-fairness-for-the-
middle-class/ “But it doesn’t feel like that anymore.
• And parents are worried – not only about their children’s future, but often, even about their own jobs. So, people should make a choice between
paying for their kids’ education and saving for their retirement. That’s not right.
• When I hear from families like yours, they feel like no one is on their side. And no wonder.
• It is OK for large businesses to sit on cash, but not small business - https://www.slideshare.net/paulyoungcga/cash-holding-canada-2017. How
is that fair
• Small business has limited budgets as such more regulatory filings and taxes just add to their already overburden.
https://www.slideshare.net/paulyoungcga/small-business-canada-pain-points-october-2017
• Yet CD Howe institute said Canadians were saving for retirement - http://www.cbc.ca/news/business/canadians-are-saving-enough-for-
retirement-says-c-d-howe-study-1.3100653
•

23. BLOG #2 – SMALL BUSINESS
• https://www.youtube.com/watch?v=8yH-Ep4Kj-c
• Trudeau makes the comment a tax system that Harper poorly managed for 10+ years. Yet Stephen Harper reduced both income tax rates and GST
over his term in office. https://globalnews.ca/news/1356467/tax-cuts-since-2005-net-canadians-30b-pbo/
“Another gift to the government in the report was that the PBO found that in relative terms — lower income Canadians earning between $12,200
and $23,300 benefited the most, increasing their after-tax income by four per cent.
• Painpoints for small business - https://www.slideshare.net/paulyoungcga/small-business-canada-pain-points-october-2017. Small business continues
to be slammed with bad after bad policies.
• You also do not tax people to prosperity. Canada has income inequality problem as do countries around the world. You do not fix income inequality
with one off policies. https://www.slideshare.net/paulyoungcga/income-inequality-canada-september-2017 Canada had the best middle class in 2014
- https://www.youtube.com/watch?v=QgbHWFgmSfQ&t=39s
• I like to know where in the world has hiking taxes grown an economy? https://www.youtube.com/watch?v=hWarBMfshaA. So, the liberals think
their tax proposal will grow the economy, right? The Liberals also are forcing a national carbon taxation -
http://business.financialpost.com/commodities/energy/ottawas-carbon-tax-plan-to-shrink-economy-by-3-billion-hurt-loonie-in-2018-study. Australia
removed the carbon tax as it was too punitive to the economy and did not reduced emissions - http://www.cbc.ca/news/canada/saskatoon/australian-
carbon-tax-opponent-chris-berg-saskatchewan-1.3884765
• Trudeau also discusses the same comments on GDP which he is also not entirely correct. https://www.slideshare.net/paulyoungcga/gdp-economy-
canada-july-2017 or https://www.slideshare.net/paulyoungcga/truth-gdp-canada-september-2017 (See slide 3). Harper had 2.3% GDP growth on
average after the 2008-2009 recession which is like what Trudeau has achieved for 2016 and 2017. It would be nice if MSM would call out Trudeau
when it comes to misinformation on the economy!!!

24. BLOG #3 – SMALL BUSINESS
• Blog – Small Business
• CBC - http://www.cbc.ca/news/canada/newfoundland-labrador/prime-minister-pierre-trudeau-interview-1.4286195
• “ Prime Minister Justin Trudeau says his government's proposed tax changes aren't worrying most Canadians — except for those
affected, who he said are making "a lot of noise."
• Wow! The top 1% pay over 20% of the federal income tax. Where is that quote in Trudeau’s statement?
https://www.slideshare.net/paulyoungcga/top-1-wealthiest-income-earners-canada-2013-and-2014-analysis-and-comments
• Reference - https://www.slideshare.net/paulyoungcga/small-business-canada-tax-proposal or BDO - https://www.bdo.ca/en-
ca/insights/tax/tax-alerts/a-detailed-review-the-government-private-company-consultation-paper/
• Here is what CPA said on the tax proposal - https://www.linkedin.com/pulse/direct-response-bill-morneau-all-canadians-james-demello-
cpa-ca/?trackingId=TKaG9KHgCj0CLY3ABlePXg%3D%3D
• How about coming clean? All small business look for ways to handle their income within the rules. Dividends are income which is
subjected to tax. Yet, Trudeau thinks wealth should be tax, right?
• Small business is about 42% of GDP or about 800B. Many of those small businesses are less than 10 employees.
• Trudeau thinks that small business is using tax loopholes to reward their family members with income at lower rate. The problem is that
Trudeau and his team lack a clear understanding what it takes to set up a small business. Small business owners do not have access to
capital like large corporation as such depend on their savings as well as personal debt to finance their business. It can take decades for
any small business to accumulate any wealth.
• Here is a tweet from Chagger - https://twitter.com/bardishkw/status/909838946833768448
• Trudeau target is those people that have net worth over 250,000. MSM should be calling what it is and that is wealth tax. It is same
approach that Bernie Sanders tried to sell during the USA election and that was tax the top 1% -
https://www.youtube.com/watch?v=hWarBMfshaA

25. SMALL BUSINESS / BLOG
• https://globalnews.ca/news/3918945/bardish-chagger-tax-changes-small-business/?utm_source=%40globalnewsto&utm_medium=Twitter
•
• “Canada’s minister of small business and tourism has acknowledged that the Liberals should have done their homework a bit better before
proposing a series of controversial changes to the tax code last summer.
• “Perhaps more information was necessary,” Bardish Chagger told The West Block‘s Vassy Kapelos during an interview this weekend.
• Small business is the back bone of the economy - https://www.ic.gc.ca/eic/site/061.nsf/vwapj/ksbs-psrpe_june-juin_2016_eng.pdf/%24file/ksbs-
psrpe_june-juin_2016_eng.pdf
• The new income sprinkling reasonability test will be a nightmare to enforce by CRA - http://www.newswire.ca/news-releases/despite-some-
improvements-new-income-sprinkling-rules-still-a-lump-of-coal-for-small-business-663960463.html
• Small business tax rate won’t matter if there is businesses shut down either through Minimum Wage hikes
(http://ottawacitizen.com/news/local-news/black-tomato-to-close-after-23-years-owner-blames-minimum-wage-hike) or high hydro rates
(http://business.financialpost.com/opinion/a-whole-new-way-screw-up-hydro-is-underway-in-ontario-and-b-c) or NAFTA Failings
(https://globalnews.ca/news/3918573/canadian-business-u-s-nafta/)
• Chagger’s riding is home to start ups - https://techvibes.com/2017/11/23/kitchener-waterloo-is-canadas-fastest-growing-market-for-tech-talent
• The bigger issues is CRA will need resources which means other areas will be impacted, like tax havens or transfer pricing or R&D credits -
https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/tax/en_TP_OECD_Country_Profiles_AODA.pdf or
• http://www.macleans.ca/politics/ottawa/ottawa-claims-it-will-reap-25-billion-from-tax-cheats-thats-wishful-thinking/ (You need resources
including treaties to enable closing down tax havens)

26. BLOG – SMALL BUSINESS / TAX HIKES
• CPP/EI – Hikes - https://www.cfib-fcei.ca/en/tools-resources/national-rate-
changes
• Carbon Taxation - https://nationalpost.com/news/politics/deeply-worrisome-
manufacturers-small-businesses-slam-liberal-carbon-tax-rebate-warn-of-
second-tax-fight

27. MORNEAU AND INCOME SPRINKLING

28. SMALL BUSINESS LASHES AT MORNEAU
• Morneau has no clue about what his tax
proposals means to small businesses
• Morneau is supposed to be former CEO
and yet feels more taxation is the answer
• CRA auditors will spending more on small
businesses than on offshore tax havens
• Morneau has never deal with tax havens,
why?
https://business.financialpost.com/opinion/
philip-cross-trudeau-and-morneau-
understand-tax-dodging-they-do-it-too
(The simple answer is that Morneau and
Trudeau have trust funds that won’t be
touched by these small business reforms

29. TWEET - SMALL BUSINESS

30. SMALL TAX CUT
$7,500 is correct but ignores other aspect of taxation reforms. The tweet is design for the
headline as Liberals never expect people and/or media to question their policies

31. PROFESSIONAL ACCOUNTANT / TAX
ANALYSIS
Source -
https://twitter.com/PierrePoilievre/
status/1082825796639690753
• Morneau called small business
tax cheats
• Consulting period was short
• The new tax policy was never well
thought out. The purpose was to
sway voters that liberals were
dealing with income inequality

32. SUMMARY
• Tax code needs to be revisited including more consultation with all stakeholders
• The correct balance between environment and the economy
• Small businesses needs support and not be treated by all levels of govt as their own instant teller
machine
• More focus on policies that support getting goods to market
• More trade deals
• Revamping R&D programs to ensure fairness
• More emphasis on expanding ports (Ocean and in-land ports)
• Streamlining the process to approve projects
• The government should be more focus on BEPS including transfer pricing related issues
• You cannot tax someone to prosperity
• End the Class Warfare
• All levels government need to be reformed
• Compensation
• Pensions
• Value for money
• Outsourcing