Resources Minister Bill Morneau will finally outline this afternoon how his direction plans to crack down on the practice of income sprinkling, months after stating his aim to do so.
The finance minister has outlined in broad terms the federal government’s request to limit the ability of business owners to reduce their personal takings taxes by moving some of their income to family members who do not give to their companies.
A “reasonableness” test will be established to determine lately much work a family member actually does at a business, and whether return sprinkling is justified.
Earlier this fall, after weeks of frantic criticism about both his proposals and own personal wealth management, Morneau suggested changes to the initial tax change proposals he put forward in July, but also reported that proposed changes to income sprinkling would kick in on New Year’s Day.
At the days, the finance minister promised the details would come later this disappointing.
With time running out, business group and opposition politicians entertain been, once again, critical of Morneau.
“First he ruined summer, and now he is witching Christmas for small business owners,” Conservative deputy leader Lisa Raitt implied on Tuesday.
Morneau has been attempting to downplay the impact of the changes.
“We are present to announce, for those three per cent of small businesses that split yield to other family members, how they can do this very simply,” he claimed Tuesday.
Senate committee wants changes scrapped — or delayed
The commercial comes as the Senate’s national finance committee issued a report Tuesday — after a months-long cross-country fact-finding search on the proposed changes — demanding the government scrap the proposals or, at the very least, hold-up implementation until Jan. 1, 2019, a year later than planned.
“This is not some warming up to embarrass the government, indeed Minister Morneau endorsed our investigation at the beginning,” Sen. Percy Mockler, the Conservative chair of the committee, told reporters. “We find creditable there is too much confusion for the government to proceed on the timeline it has suggested.”
The 50-page narrative documents a host of witnesses demanding senators urge the government to depart the proposed changes entirely. “We are inclined to agree. We are not convinced that the regulation has made a good case for its proposals,” the report states.
The committee mean it was particularly troubled by plans for the so-called “reasonableness test” for income sprinkling, foreshadowing it could lead to arbitrary decisions by Revenue Canada bureaucrats. “The hardship of understanding and complying with the rules will lead to uncertainty, bring up tax appeals and litigation,” the report reads.
Beyond the specific changes to the inconsequential business tax regime, the Senate said the government should immediately originate a comprehensive review of the entire tax code — something that has not be done since the 1960s, when the management of the day launched a royal commission on the matter.
Sen. Elizabeth Marshall, a Tory associate of the committee from Newfoundland and Labrador, said the tax system has become a “turgid and unwieldy monster” after years of haphazard additions. “An independent notice should take place regardless if the government moves forward with its proposed variations,” she said.
Not one of the Trudeau-appointed Independent senators were present for Wednesday’s embrace conference, leading to questions as to whether the critical report was rammed at the end of ones tether with by Conservative appointees. Mockler insisted a majority of the committee — comprising five Moderates, five Independents and two Senate Liberals — backed the report.