{"id":15244,"date":"2018-01-08T09:00:26","date_gmt":"2018-01-08T17:00:26","guid":{"rendered":"http:\/\/www.nexusnewspaper.com\/?p=15244"},"modified":"2018-01-05T12:01:19","modified_gmt":"2018-01-05T20:01:19","slug":"calculated-thought-corporate-tax-changes-get-a-reboot","status":"publish","type":"post","link":"https:\/\/www.nexusnewspaper.com\/newsite\/2018\/01\/08\/calculated-thought-corporate-tax-changes-get-a-reboot\/","title":{"rendered":"Calculated Thought<\/em>: Corporate tax changes get a reboot"},"content":{"rendered":"

After public outcry, the proposed changes to how corporations are taxed in Canada have been redrafted in hopes of simplifying the contentious updates.<\/p>\n

The most debated issue was the practice of business owners structuring their corporation to have family members as shareholders and pay them dividends, spreading income across the family to reduce taxes, a process referred to as \u201cincome sprinkling.\u201d<\/p>\n

The government\u2019s controversial plan was to expand the \u201ckiddie tax,\u201d also known as the tax on split income\u2014a provision that imposes the highest marginal tax rate to income transferred to minors\u2014to include all adult children and family members.<\/p>\n

\"\"<\/a>
Calculated Thought<\/em> is a column dealing with student finances that is featured in every issue of Nexus<\/em>.<\/figcaption><\/figure>\n

According to a Department of Finance press release, there are now \u201cbright-line\u201d tests to determine what\u2014if any\u2014income earned by family members through a corporation will face the highest rate, and if those tests are not met, a reasonableness test will be performed by the CRA.<\/p>\n

To recognize that business ownership plays a role in retirement, any spouse over age 65 will not be affected. Those over 18 who work at least 20 hours per week for the business won\u2019t be hassled. Adults over 25 who own 10 percent or more of the business get a pass, too.<\/p>\n

A spouse who doesn\u2019t meet these tests, or the reasonableness test, is subject to tax that would make the scheme undesirable.<\/p>\n

This leads to an interesting passage in the release\u2019s section on \u201cgender-based analysis.\u201d<\/p>\n

The release says that data show that men transfer 70 percent of the sprinkled income, and that 68 percent of it is received by women. The government document goes on to say that \u201cwhile this income is of benefit for recipients, it also creates incentives that reduce female participation in the workforce. Increased participation of women in the workforce is a source of economic opportunity for individuals and is a major driver of overall economic growth.\u201d<\/p>\n

I suppose that the government\u2019s suggestion is that some women have incentive to avoid employment in favour of a lower tax burden on their families afforded through shared, family corporate ownership.<\/p>\n

I haven\u2019t found any comment from women regarding the government\u2019s statement, and would be interested to know how this is being interpreted.<\/p>\n

The medical community has been a staunch opponent to these changes. Following negotiation with the federal government in the \u201990s, the ability to incorporate was built into doctors\u2019 compensation packages, and income splitting through dividends became a common practice.<\/p>\n

Doctors Nova Scotia director David Chapman reacted to the changes by expressing that they still don\u2019t address this deal struck with doctors, and that they put pressure on people who move to underserved communities where work can be scarce for their spouses. The BC government has incentives for doctors to work in underserved communities, but the new rules may work against those efforts.<\/p>\n

Support for the changes comes from people earning income as employees who don\u2019t get to enjoy splitting income with their spouses, and that\u2019s a strong argument.<\/p>\n

It will be a long road ahead tackling the issues brought on by a corporate tax system that has Canadians at odds.<\/p>\n","protected":false},"excerpt":{"rendered":"

After public outcry, the proposed changes to how corporations are taxed in Canada have been redrafted in hopes of simplifying the contentious updates. The most debated issue was the practice of business owners structuring their corporation to have family members as shareholders and pay them dividends, spreading income across the family to reduce taxes, a […]<\/p>\n","protected":false},"author":2,"featured_media":12581,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5,204],"tags":[],"class_list":["post-15244","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-columns","category-january-10-2018"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts\/15244","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/comments?post=15244"}],"version-history":[{"count":1,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts\/15244\/revisions"}],"predecessor-version":[{"id":15245,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts\/15244\/revisions\/15245"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/media\/12581"}],"wp:attachment":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/media?parent=15244"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/categories?post=15244"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/tags?post=15244"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}