Essay On Small Business Tax - 1029 Words

Proposed Small Business Tax Changes and Revisions On July 18, the Federal Government announced their intention to restrict certain tax planning strategies available to shareholders of private corporations that they felt unfairly benefit business owners over salary-earning Canadians. The consultation period during which stakeholders were allowed to provide comments on the proposals ended on October 2, 2017. Ottawa’s original proposals were met with widespread criticism from the business community. As a result, during Small Business Week, October 16 - 20, some revisions were announced. The below summarizes the original proposals as well as where we currently stand. Income Sprinkling Income sprinkling is a method utilized by some business†¦show more content†¦October 18 Revision The government will be simplifying their proposal for income sprinkling but will still move forward with introducing a reasonableness test. Details on how they plan to enact this legislation are forthcoming. The effective date of this proposal will be January 1, 2018. Ottawa will not move forward with the measures aimed at restricting use of the Lifetime Capital Gains Exemption (LCGE) as their proposal would have unintended and severe consequences on intergenerational transfers of a business. Passive Investments within Private Corporations A business owner that is generating excess cash on top of what they require to survive can take advantage of a tax deferral that is not available to salaried employees. The excess income generated can be invested in passive investments within the corporation. Since the excess income has been taxed at a lower corporate rate, this leaves more funds available for investment which allows for a higher level of compounding as well. Salaried employees are not in a position to be able to defer tax on an unlimited amount of income. Even though the business owner will eventually have to pay themselves dividends, Ottawa feels this deferral advantage gives them an unfair advantage over salary-earning Canadians. Original Proposal Current rules allow additional capital that is not paid out to the owners or used in the business to be left and invested within the corporation.Show MoreRelatedThe Role Of Value Added Tax In The UK701 Words   |  3 Pageseconomic development. After Income Tax and National Insurance, value added tax has become the third largest source of income for the British government. Value Added Tax is referred to as VAT. Its predecessor was Purchase Tax in the United Kingdom. And the government began to change to Value Added Tax officially in April 1973. Since January 4, 2011, the standard value added tax of the UK was increased from 17.5% to 20%. 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