Private corporation proposals: CPAs step up

During the recent federal consultations on tax planning using private corporations, Chartered Professional Accountants (CPAs) made their voices heard.

The federal government’s July 18, 2017 proposals to address tax planning using private corporations generated concerns among many experts and stakeholders, including CPA Canada members. CPAs have been concerned enough to draw on their expertise and devote tremendous time and energy in making the government aware that the proposals could have negative unintended consequences, especially for the small business community. For CPA Canada, the compressed 75-day consultation period, its occurrence in the summer months, and the high complexity of the draft legislation and proposals, make the efforts of our members that much more impressive.

Sacrificing vacation time, nights and weekends, many CPAs across Canada were actively involved in the consultations, calling attention to the far-reaching potential impacts.

Proposals not in the public’s best interest

CPA Canada arranged and took part in numerous stakeholder meetings and events, assembled tax committee members and solicited comments from members at large in order to develop its formal submission.

In its submission, CPA Canada states that the proposals are contrary to the public interest due to the unintended consequences they would produce for Canadian businesspeople and their families at all income levels. The complexity and uncertainty created by the proposals introduces significant risk to the integrity of the tax system.

Three separate submissions by the Joint Tax Committee of the Canadian Bar Association and CPA Canada (Joint Committee), running over 150 combined pages, examine the technical complexity of the proposals in detail.

Small business owners, their advisers and Canada Revenue Agency auditors have already been challenged to deal with other recent and highly complex changes including those affecting testamentary trusts, subsection 55(2) and the small business deduction. The July 18 proposals would magnify these challenges, raising concerns about taxpayers’ ability to properly comply.

CPA Canada also uses its submission to express apprehensions about the government’s approach to the consultations. Because of the short timeframe along with the release of draft legislation, the proposals have not been subject to the detailed, constructive, two-way consultation process that such material tax policy changes deserve.

Due process for introducing tax policy changes

The government’s proposals represent a significant policy shift and cast a wide net.

New tax policy should be introduced through a due process, adhering to principles of procedural fairness, transparency and consultation. This includes open analysis and discussion with businesses, the tax community and other stakeholders, together with an appropriate implementation timetable and transitional rules that would give affected taxpayers a reasonable amount of time to bring their affairs in line with the new policy.

The federal government needs to be balanced in any approach to create fair and effective taxation to ensure that entrepreneurs and small business, as generators of jobs and economic growth, are supported over the long term and not harmed by tax policy changes.

It’s time for comprehensive tax reform

CPA Canada ultimately calls for the government to set aside the proposals pending a more comprehensive tax system review. The goal of this top-to-bottom review should be to ensure Canada’s tax system is fair, simple and efficient, promotes sustainable growth and supports the competitiveness of Canadian businesses, now and in the future.

You can find the CPA Canada and Joint Committee submissions, along with updates on CPA Canada’s activities in this area, on our dedicated webpage.

We want to hear from you

How are you and your small business clients dealing with the current uncertainty and preparing for the potential changes ahead? If you have thoughts on the private corporation tax proposals that you’d like to share with CPA Canada for consideration, please email us with your ideas.

CPA Canada’s Tax Blog is designed to create an exchange of ideas on tax policy and practice issues, and their impact on those who practice tax. Your comments can provide helpful input into the public interest advocacy positions developed by CPA Canada.

About the Author

Bruce Ball, FCPA, FCA, CFP

Vice-president, Taxation, CPA Canada