2017-09-20

Town hall meeting draws critics of tax changes

by Gayle Wilson

  • <p>GAYLE WILSON PHOTO</p><p>Bob Richards, president of the Bridgewater and Area Chamber of Commerce, tells MP Bernadette Jordan at her town hall meeting in Lunenburg concerning proposed tax changes, &#8220;We need more time, we want more input.&#8221;</p>
  • <p>GAYLE WILSON PHOTO</p><p>John Swain, a chartered public accountant in Bridgewater who specializes in small business, says clients are concerned they will have to lay off employees or defer hiring any new ones if the proposed tax changes go through.</p>
  • <p>GAYLE WILSON PHOTO</p><p>Dr. Raza Ghaffari, who works at the South Shore Regional Hospital in Bridgewater, was one of a number of physicians who spoke out about the proposed tax changes at the town hall meeting hosted by MP Bernadette Jordan in Lunenburg September 12.</p>
  • <p>GAYLE WILSON PHOTO</p><p>MP for South Shore-St. Margaret&#8217;s, Bernadette Jordan, fielded a barrage of comments and questions at a town hall meeting at the Lunenburg fire hall on September 12 concerning her Liberal government&#8217;s proposed tax changes.</p>
  • <p>GAYLE WILSON PHOTO</p><p>MP for South Shore-St. Margaret&#8217;s, Bernadette Jordan, fielded a barrage of comments and questions at a town hall meeting at the Lunenburg fire hall on September 12 concerning her Liberal government&#8217;s proposed tax changes.</p>

They came from as far away as Musquodoboit Harbour and Dartmouth to let the MP for South Shore-St. Margaret's, Bernadette Jordan, know what they thought of the Liberal government's proposed tax changes.

More than 200 people crowded into the Lunenburg Fire Department Hall and peered into the windows from outside at the town hall meeting Jordan held there September 12 to discuss the issue.

Taking off her suit jacket in the stifling warm room, Jordan quickly got down to business.

"I know this is an issue that is extremely important to a lot of people," she said.

The MP noted that reviewing the tax code and looking at tax fairness was one of the Liberals' campaign promises, "and it's something we are committed to doing."

However, she assured the audience of mostly business people that she would be taking what she heard from the participants back to Ottawa.

"I can guarantee you there will be meetings. I can guarantee you that we are still talking about this. It's not a done deal."

Canada's finance minister, Bill Morneau, introduced proposed changes to the tax code on July 18 and said there would be a 75-day public consultation period surrounding them.

Defending the proposed changes, Prime Minister Justin Trudeau reportedly told a caucus meeting earlier this month, "People who make $50,000 a year should not pay higher taxes than people who make $250,000 a year," he said. "We are always open to better ways to fix that problem, but we are going to fix that problem."

While Jordan told the audience there are a number of people in support of the tax changes, she indicated that the previous day she had met with about 20 tax planners, accountants and lawyers, "who kind of gave me a different perspective on [it] than things I had heard from other people."

Jordan explained to the audience that there are three main areas the government is looking at.

The first is so-called income sprinkling, where a private corporation can share its income with the owner's spouse or adult children for tax purposes.

"What we're saying is there has to be some proof that those people actually work in that corporation," said Jordan.

The second relates to passive investments in a corporation.

"And that one is still wide open. There's actually nothing written about that one yet, it's just one that we want to find out more about. And it seems to be what a lot of people are very concerned about," said the MP.

"The other is capital gains, and when you retire, sell your business."

The government is proposing to eliminate the ability to spread capital gains exemptions to shareholding family members or a trust when a business is sold.

However, Jordan emphasized, "There is no legislation yet that says, 'This is what's going to happen.'"

Bob Richards, president of the Bridgewater and Area Chamber of Commerce, was one of the first to comment. He said the chamber had yet to develop a position on the changes since not all of them were yet fully understood, and noted its big issue is "the time frame.

"Some of the rules are already in place now. We have to make decisions before the end of December for next year." He said some of the changes would be retroactive to July 18, but that not not all of the details are known yet.

"So what we're saying is we need more time, we want more input."

Another gentleman challenged Jordan on the timing.

"Why did it take you so long to actually discuss the possible ramifications with the tax people and the accountants. and here we are realizing this is the biggest change to the tax rule in 50 years, according to my accountants. If this is such a big change, why did it take you so long to react?"

Jordan defended herself saying she had held previous town hall meetings and met with physicians and tax specialists previously as well, and has already spoken to the finance minister's office about the concerns about the timeline.

Others commented on the language surrounding the proposed changes.

Dr. Neil Smith is a physician who co-owns The Snore Shop. Based in Dartmouth, it has 40 locations in the Maritimes, including Bridgewater, employs 50 people and had a payroll of more than $2.6 million last year, according to Smith.

He spoke as both a business person and a physician.

"I think that what's so discouraging to so many people is the language that's used in describing this issue. It strikes to the core of who people are when you say, 'You're cheating the system; you're using loopholes.'"

Smith explained that in the 1990s, rather than increase payment to physicians, the government encouraged them to incorporate so they could take advantage of all that incorporation offers to small business people.

"These weren't loopholes," he insisted.

Jordan interjected to agree that strategies such as income sprinkling were all "legal."

Moreover, Smith disputed Trudeau's concerning $50,000 versus $250,000.

"No business making $250,000 has somebody working for them paying less taxes than somebody making $50,000. We all know that. A $50,000 earner probably pays $9,000 [in taxes]. Even at the low end of the spectrum (the $250,000 business earner] is still paying $40,000 and 16 per cent."

Smith said, "The math isn't there, and it's never been there. But it's thrown out there to create animosity and antagonize people and that's really offensive."

Others business owners pointed out the sacrifices and risks they made to be in a position where they're earning money, and questioned the fairness of having their income equated with a salaried worker, many of whom have guaranteed pensions.

One woman said she was the soul breadwinner in her family and in the previous four days she had worked 40 hours.

"How is it, my husband, who stays at home and looks after our kids and does all the things that are involved in running the household, is not contributing to my success?"

Bruce Inglis, of Liverpool, told Jordan he and his wife took out mortgages on their and his mother's home to set up their business.

His wife specifically withdrew from taking an education degree to look after the children so he could work 80 hours a week making it a success.

"So we're in an awful position. And to me it's devaluing her by claiming that we're using a 'loophole' to make money."

As well as concern about the implication for business owners and their families, audience members also expressed concern about the broader impact on the local and Canadian economy.

John Swain, a certified public accountant, told Jordan his clients are worried they're going to have to let employees go.

"Or they want to hire someone but are concerned."

He said others are questioning their ability to continue with charitable sponsorships.

"Knowing the caring person that you are, how are you going to react to those comments that are undoubtedly coming if this passes," he asked Jordan.

Matthew and Carmen MacKenzie travelled from Musquodoboit Harbour to attend the session, saying they've been speaking at each town hall covering the proposed changes.

They own a tool and dye company and a medical technology firm employing 25 people. According to Matthew, they've invested $4.8 million in the businesses over the past 11 years, with money they accumulate in a holding company.

"So they're forcing us to take money out of the holding company to pay personal tax at 55 per cent, or whatever it's going to be, and we'll have less to invest in a company that has huge potential."

Andrew Button, who advises start-up businesses, agreed.

"This is about the ability of entrepreneurs that have been successful, and, quire frankly, why are we being apologetic around people making money in this country," he asked, sparking a round of applause.

Button reminded that the Liberal government just announced a $1.5 million investment in Volta Labs.

"How did that lab get started? It's because of four entrepreneurs who made a bunch of money off of a company that they built here in Atlantic Canada and decided that they wanted to create a home for people to come and do that. That is where that money is getting invested. So I just really hope that that message is getting through loud and clear to the folks in Ottawa."

"I'm hearing it tonight," Jordan assured him.

One gentleman asked how the issue started in the first place.

"Who's complaining? Who's upset? Is it government employees? Is it salaried employees? Who's coming forth in droves to say it's unfair to give small business some flexibility, be it sprinkling or whatever? "

Jordan responded, "I can't answer that. I can tell you that I am hearing from people, not in this room, obviously, who didn't come tonight, who do agree with what we're doing."

Jonathan Lyons, the president of Eastport Financial Group, capped up the comments asking Jordan for her opinion on everything.

"You had a meeting with some fairly knowledgeable tax people yesterday. You've had two hours with them. You've had two hours with us tonight. I would like to know what your message is going back to your caucus. "

Her reply: "My message going back is we need to look at this. We need to listen to what people are saying. I would like to see a slow down in the process, I will admit that. I think that there are things that can be done to change it to make it more palatable. I think there are some things that can stay. Because I am hearing some different things. But I do think that we can do a better job. That's my message."

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