UPDATED: Oct 21/17 see [NEW]

The Federal Government is walking back their proposed tax changes. We will update this post with relevent links. 

Oct 20/17: Federal finance minister Morneau pitches small business on tax reform (CBC)

Oct 20/17: Full package of revised tax proposals requires more analysis, consultation (CFIB)

Oct 20/17: Examining Bill Morneau’s tax-reform tweaks (Canadian Manufacturing)

Oct 20/17: Conservative leader Scheer decries 'irony' of small business tax plan (CBC)

Oct 20/17: Morneau announces plans to work with angel investors in Waterloo (570 News)

Oct 20/17: FINANCE MINISTER SAYS GOV’T WILL WORK WITH ANGEL AND VC COMMUNITY TO BUILD TAX FAIRNESS PLAN (Beta Kit)

Oct 20/17: Morneau assures tech community tax changes won’t squeeze out investment capital (Globe and Mail; paywall)

[NEW]  Oct 16/17: CFA reacts to announcement of small business tax changes (Canadian Federation of Agriculture)

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Original Post

On July 18th, the Federal Government’s Department of Finance announced significant proposed changes to certain mainstream tax planning. Details have been released in a comprehensive, technical consultation paper focusing on tax practices commonly used involving private corporations.

These tax practices are being labeled by the government as tax loopholes and they are implying that small businesses are taking advantage of them unfairly. That entrepreneurs should be treated equally alongside their employees when it comes to taxation.

A brief summary of the proposed changes:

  • Income splitting (dividends and salaries) with adult related individuals will no longer generally be possible unless the individual contributes to the business
  • Multiplying the Capital Gains Exemption will be severely curtailed
  • Increased reporting requirements for trusts
  • Increased taxation on passive income earned in corporations

Most of the proposed changes apply to 2018 and beyond.  The new rules are subject to a consultation period from now until October 2, 2017. [Courtesy: SB Partners | More details]

The finance minister Bill Morneau, healthcare advisor Michael Wolfson and UBC’s Kevin Milligan are convinced that these tax changes will only affect “top earners” who operate their businesses as Canadian Controlled Private Corporations (CCPC). Small business owners, associations and the Canadian Federation of Independent Businesses (CFIB) think otherwise.

Consider these recent headlines from this summer:

Vids to Watch

Minister Morneau grilled by citizens [in Oakville] angry over tax plan

Trudeau dodges questions over tax benefits he receives through family trusts

Silicon Halton Members Weigh In

Earlier this month, Silicon Halton members representing local technology companies met to learn and discuss the impact these changes will have on their businesses if they are implemented.

Providing guidance and advice were Richard Weber, Partner CPA, CA and Gregory Clarke, Partner CPA, CA of SB Partners.

These tech leaders are frustrated, confused and angry. Clearly, the academics, policy advisors and Canadian government don’t get what it takes to be an entrepreneur and build a Canadian company.  There are three things, I believe, that the policy makers fail to understand when it comes to entrepreneurs and the SME market.

Entrepreneurs are:

  • Builders, not earners. They build companies by taking significant risk which they live with each and every waking moment. They use the cash their business generates to invest in people, in ideas and to grow their business. Very often they come last when it comes to “earning” a living because they put their employees first.
  • Practitioners, not theorists. They roll up their sleeves to help their customers be successful. They spend much of their waking hours (often more than 12 hours a day) working on and in their business generating cash by delivering value to the markets and customers they serve. They have little patience for academics, public servants and career politicians who think they know what it takes to be an entrepreneur and how they should should start, grow and scale their business.
  • Producers, not cheaters. Yes, there is a negative narrative right now on social media that portrays entrepreneurs as tax evaders. Entrepreneurs produce jobs, they pay taxes, they pay employment insurance, they pay into Canada’s pension plan.

The reality is that small to midsized companies are the largest contributors to the Canadian economy. They employ over 10M Canadians. Canadian small and mid-sized companies generate significant tax revenue that is used, in part, to pay the 4.4M people employed by the government and government funded organizations.

Finally, the entrepreneurs that become “rich” earn it through hard work, sacrifice and taking risk. They don’t become millionaires like many government employees do via pensions and other entitlements that in my view are fair game to repeal.

Consider what this tech entrepreneur says about these proposed tax changes:

JB feedback

Consider what another tech entrepreneur said to his MP, John Oliver:

"Per the following reports from Statistics Canada you will see that there are 1,165,000 SME businesses in Canada.

  • These SME businesses employ 10,460,000 Canadians
  • Large Entreprise only employs. 1,130,000 Canadians
  • There are another 4.4 million Canadians employed but they are government and government funded employees.

So it looks like the SME sector pays for 90% of government funded employees. And pretty much all government employees retire millionaires because of their guaranteed pensions. For the SME sector there are no guarantees and certainly No pensions, We take huge risks and there is no one to take care of us when things go wrong."

Robin Smith, co-founder of VL Omni, featured on CBC's On the Money

How Will These Changes Affect Small Business?

According to the Canadian Federation of Independent Businesses (CFIB) these are most significant tax changes in decades, with the potential to severely harm Canadian small businesses especially in three areas: 1) Making it harder to share income with your family; 2) Dramatically increase the taxes on your business investments, and 3) Prevent you from passing down your business.

In CFIB’s webinar, CEO Dan Kelly and tax expert Evelyn Jacks outline how these changes could affect us all. We've provided an indepth timeline and here's the raw transcript [Direct Download].

02:39 | Opening remarks from Evenlyn Jacks

03:55 | Managing Tax Risk is More Important Than Ever Now. What Evelyn Jacks covers in this webcast

05:04 | Where does the wealth lie in Canada? The three fasted growth assets: 1) Mutual funds, investment funds, income trusts; 2) Business equity, and 3) Stocks

06:04 | What's at Stake in these tax reforms and why taxman wants a bigger piece of passive investment income earned by private corps

06:58 | Spotlight on Private Business Owners and key definitions federal government is using to define "High Income" and "Unintended Advantages". An entrepreneurs tax audit risk will be exponentially higher than an employer's.

09:52 | Principle of Canadian Tax System and the rights of entrepreneurs to pay as little tax as legally allowed

11:02 | The Reality for Governments. Service economy, shift in demographics and high personal tax rates are driving the growth of private corps

12:17 | Federal Personal Income Taxes and new tax bracket introduced in 2016.

13:17 | Provincial Personal Income Taxes (on top of Federal Income Taxes).

15:07 | Risk Assumption: Your Reality Employed and Self Employed. Tax audit risk are proposed to be increased. Integration of Personal Corporate Tax

20:07: | Is it Better to Earn Investment Income Inside or Outside the Corporation?

20:52 | What's Changing: Taxation of Passive Investments. With new changes the effective tax rate will be 72.7%! Yet, the Finance Canada say:"new rules will have 'limited impact' on existing passive investments". But are they right? The answer is no... the devil is in the details.

23:23 | The Purpose of Small Business Deduction, Jun 18, 1971 and what are the questions for Canadian Controlled Private Corporations (CCPCs)?

26:37 | Income Splitting with Family Members. Specified vs. Connected Individual. Definition of Split Income (now vs. the proposed future). Test for 18 to 25 years old starting in 2018.

30:34 | Gender Issues. Families, by default have a lot to lose.

31:54 | The problem of "reasonableness testing" being re-introduced. How CRA will "second-guess" legitimate business purposes in a vague and arbitrary manner resulted in unfair tax treatment.

33:11 | Capital Gaines Exemptions. Significant proposed changes. What is an ineligible gain going forward? Election to crystalize Capital Gains Exemptions. Talk to your tax accountant immediately.

35:08 | Surplus Stripping. More concerns when it comes to succession planning?

35:34 | Questions on the Proposals with respect to double and triple taxing. And don't forget there are other changes for professional practices that will increase costs to run a business.

36:41 | Key things to think about and ask your MP

37:34 | Who Bears the Burden of Corporate Tax Increases? For every $1 increased in Corporate Income Taxes wages fall by $1.52 in AB, $2.72 in MB and $3.85 in PEI

38:16 | Questions and Strategies.

39:06 | Summary and your voice matters so talk to your MP, talk to your tax accountant

39:50 | Hand over to Dan Kelly from CFIB to present on: "The Fight Against #unfairtaxchanges.

41:00 | Entrepreneurs are concerned that the Canadian government is accusing them of being tax cheats. That the value of the Canadian entrepreneur is not truly understood and that small business is the major contributor for jobs, economic prosperity and growth.

42:20 | Proposed tax changes but why are their lower tax rate on small businesses in the first place? There are three major reasons.

43:56 | The Four Key Issues Facing Small Businesses Because of Proposed Tax Changes. They will create a decade of uncertainty.

45:03 | Small Businesses are Firmly in the Middle Class. CFIB believes all small businesses will be affected by these proposed tax changes not just the ones earning $150K and up.

45:51 | How the Canadian government is confused. They are encouraging innovation but taxing the funds that small businesses use to innovate.

47:16 | Taxation Facts that All Levels of Government Need to be Reminded Of. Employer vs. Employee tax fairness

48:40 | What We Want from Government.

49:42 | What The Small Business Community Needs to Do Now.

52:06 | Important Dates

54:00 | Q&A

54:21 | "Is there a document that we can have access to that provides the specifics of the tax proposals?"

55:01 | "Does government think that a different government might reverse all of these tax changes?"

56:10 | Comment from angry tax accountant on impact on small business and entrepreneurs

What Can You Do?

At the very least it’s important that we better understand and appreciate the role entrepreneurs play in making Canada successful. And, that entrepreneurs are some of the hardest working people and not tax evaders. Government needs to provide entrepreneurs with incentives, tools and a climate that motivates them to start and grow companies.

Learn more about how these proposed tax changes will affect entrepreneurs and their companies. Discuss this with your MP, with other Silicon Halton members and regardless of which side of this debate you’re on… recognize that the Canadian economy and employment is driven mostly by small and mid-sized businesses and the entrepreneurs and employees that start and run them.

 

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SB Partners hero graphic

Here’s my next installment in Silicon Halton’s conversation series. I’m reaching out to people within the SH community and beyond. The topics and reasons vary but what is common that drives interviews is Silicon Halton’s continued goal of helping our members grow.  

For us growth is a core part of what keeps the heart of the Silicon Halton community beating. We want you to grow through learning, grow your networks, grow professionally, grow your company and do everything possible to help the hi-tech industry grow in Halton region.

SB Partners has been a partner and sponsor of Silicon Halton since the community started in 2009. Their contributions have been important to the growth of SH.

In addition to the financial contributions they’ve made, many of the Partners have presented at SH meetups on a variety of topics, have been guests at our peer to peer events, and made themselves available as subject matter experts. It’s an amazing community focused partnership!

Something Wonderful Happened This Year at SB Partners

This February, CEO John Chisholm announced the rebranding of SB Partners which included a new brand, tagline and website. But it was much more than a “new look and feel”. It was more strategic and launched SB Partners on their newest journey with their clients and within Halton community.

Call me curious (or maybe nosey) I wanted to learn more and get the backstory! Why did SB Partners feel the need to rebrand? How did they do it? Should other companies rebrand, if so when and why? What was the experience of re-creating the SB Partners brand like?

So, I reached out to Elaine Holding, Director Client Services and Business Development at SB Partners to ask these questions and others. Below is our full interview.

Interview Timeline

You can fast forward/rewind by clicking on the play button. Mouseover the waveform chart above and/or use the > key on your keyboard .

00:00 | Introduction and conversation starter

01:06 | Elaine gives us a bit of an overview of SB Partners and some of the key leaders important for Silicon Halton members to get to know. She talks about the value SB Partners offers to the local community and delivers to private tech businesses and entrepreneurs

03:32 | We talk about how SB Partners have been involved in the Silicon Halton and broader business community to date and the importance of "doing the right thing"

05:36 | SB Partners focus and role in providing thought leadership and informing the community on key matters that can impact their business

07:15 | Elaine and I discuss:

  • How Silicon Halton members can engage and get value from engaging with SB Partners
  • How SB Partners is helping technology companies of various sizes, stages of growth and development
  • How it's important to establish the right corporate and accounting structure at the outset

10:28 | Elaine outlines ways to engage with SB Partners:

  1. When your business model is in place and you need to ask about the corporate and financial structure
  2. When you're starting to earn revenue and you need to ask about CRA (Canadian Revenue Agency) compliance
  3. How to pay yourself as an owner. Understanding what your options are
  4. Understanding how the tax system is going to work for you in the best way, and as the company matures
  5. Getting advice on succession planning, valuation of your company and others for mergers and acquisitions AND setting up family trusts to fully capitalize on being an entrepreneur

13:15 | I ask Elaine how SB Partners is designed to help growth oriented technology entrepreneurs and their companies. And, the importance of choosing an accounting firm that can scale with your growth

15:06 | Elaine explains how SB Partners has being getting value from their partnership and sponsorship with Silicon Halton. Also, she offers her perspective on how Silicon Halton is delivering value to tech companies in Halton region

17:30 | I talk briefly about a new Silicon Halton program being launched with SB Partners designed for CEOs of local tech entrepreneurs aspiring to grow. Stay tuned!

18:22 | Really cool discussion with Elaine about SB Partners new branding and why they did it. Key areas covered:

  • Why did SB Partners rebrand? A very important change in the accounting industry was a contributing factor
  • Firm has evolved and current branding was becoming a bit disjointed and inconsistent. It was time to refresh the brand to reflect where it is today and where SB Partners is heading
  • Why new hires chose SB Partners recently and the role the new brand played in this decision
  • The role "archetypes" play in branding a company. For example an example of an Outlaw archetype would be Harley Davidson. It's important that your brand represents who you are not what you want it to be. The archetype that SB Partners chose was the Hero
  • Elaine talks about the meaning behind the brand, the logo and their tagline: "Accounting for Our Community"

26:51 | Elaine shares the story about the internal launch of the rebranding and the role the movie: "It's a Wonderful Life" played. We talk about how other companies should think about branding over the longer term in order to stay relevant and in SB Partner's case independent. Here’s a key moment in the the movie that resonates with me that I want to share with you:

31:47 | Chris asks Elaine "what are the keys to success for today's tech companies and tech entrepreneurs". Hint: it boils down to leadership and humility. We wrap up the interview

Thank You SB Partners!

Thanks to Elaine and the SB Partners team for all you do for our community and Silicon Halton. Check these presentations delivered by members of the SB Partners team at past Silicon Halton events and you’ll see why they’re a great community partner!

More About “It’s a Wonderful Life”

It’s a Wonderful Life is one of my favourite movies and the meaning behind it strikes a deep chord with me. Below is a music video that I found and wanted to share. It demonstrates how each one of us, in our community, can be intertwined and positively impact other people’s lives.

 

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Chris Herbert is the founder of Mi6 Agency. Mi6 is a B2B (Business to Business) marketing and business development agency dedicated to helping companies build their brands and develop commercial relationships. He is the founder of ProductCamp Toronto and the Hi-tech community Silicon Halton. He tweets under the handle @B2Bspecialist.

Tags: Conversation Series

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Solopreneur Traction Marketing

Halton Region is home to hundreds of solopreneurs...

...and small businesses that provide valuable products, services and solutions. The Silicon Halton Peer to Peer (P2P)  group meets monthly to network, learn and grow. They partner, collaborate and collectively work together to make their businesses succeed and deliver value to Silicon Halton members.

The Solopreneur P2P Traction Marketing Campaign is a collaborative project that focuses on two things:

  • To generate awareness of the Solopreneur P2P & increase active participation in monthly meetings. Learn more >
  • To generate awareness, business opportunities and new customers.

Meet Our Solopreneurs!

Silicon Halton is proud and fortunate to have these solopreneur businesses here in Halton. We encourage you to learn more about them and to contact them to learn more about what they offer.

PlanitSolarBlinds

PlanIt! Comfort Optimization Blinds™ are a green alternative to regular blinds. They let in full sunlight, block 92% of UV rays, generate heat in cooler months and deflect solar heat in warmer months, lowering energy cost up to 40%.This innovative product is the only blind on the market today that sustains a comfortable room temperature throughout the year

For many entrepreneurs and small businesses, high utility costs have become a big operating expense. Similarly, low productivity can result from fluctuating temperatures and poor lighting. This can hamper performance and contribute to injuries or absenteeism.

Made from transparent, eco-friendly food-grade PVC material, they work like a two-way mirror allowing 90% visibility to the outside in the day, while preventing onlookers from seeing in, providing privacy and protection - ideal for health professionals, gyms and salons. At night, lighting makes inner contents and occupants fully visible from outside providing security.

This product may qualify you for Federal or Provincial energy saving incentives. Contact us today to get your free estimate and ROI assessment using the form below.

Kara Morgan  |  905-488-1904/1-888-827-6790
This email address is being protected from spambots. You need JavaScript enabled to view it.  |  www.planitoutsourcingsolutions.com  


ModTel Installations helps our customers navigate the constantly changing and often confusing telecommunications landscape.  For some customers, that’s as simple as maintaining and upgrading their older Nortel/Norstar phone system.  For some, it’s taking advantage of cost savings and new features with a move to VoIP. For other it’s enabling all their remote employees and offices to be extensions on the same system, by moving to a game changing Hosted VoIP solution.  

No longer do companies have to pay for every phone every month.  Our brand new Hosted model is based on the number of concurrent calls a company makes.  We will work with you to customize a plan to fit your specific needs and budget.  Check out our no-contract Hosted VoIP solution today.  Save 20% on your first year of service when you call us on 1.888.553.9512 and mention “SoloP2P”

Alan Montgomery, ModTel Installations
1.888.553.9512 / 905.319.7410
www.modtel.ca / This email address is being protected from spambots. You need JavaScript enabled to view it.


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Cards In Motion - Media trends support that business and consumer audiences prefer video as the quickest and most engaging way to receive comprehensive information that will inform their decision-making. Yet as our devices become congested with digital noise, the personal nature of a printed package landing on one’s desk grows even more alluring. Cards in Motion blends the most appealing attributes of print and digital media into one unique, highly openable marketing/communications tool.

From the moment it’s delivered, a video brochure by Cards in Motion is hard to ignore – the high quality print production and substantial book-like quality beg for it to be opened. Once the front cover is lifted, the viewer’s attention is instantly captivated by vivid HD quality video with sound that communicates your message on the embedded LCD screen. All our video brochures are custom tailored to each client’s needs and budget for maximum impact. Don't keep letting your competitors stay ahead of you, contact us today and let’s get it done.

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2017 IIoT Symposium event header

Silicon Halton, and my firm Mi6 Agency,  are communications partners for the upcoming IIoT Symposium being produced by McRock Capital taking place on May 18, 2017 in Montreal, Canada.

McRock Capital, was the very first Venture Capital Firm and Fund in Canada and most likely the world, to be exclusively focused on the Industrial Internet of Things (IIoT) market. I’ve attended this event twice and will be covering it on behalf of Silicon Halton this year.

What’s very interesting about this event is how the McRock Capital team have brought together the right mix of stakeholders in the IIoT scene.

  • Large global enterprises: companies that provide market insights and are looking to invest, partner and go to market with IIoT startups

  • Entrepreneurs: emerging leaders and risk takers who are forging new paths in the IIoT space through their ideas, startups and passion

  • Funders: people and organizations that finance and fund IIoT ideas and startups

  • Subject Matter Experts: who can help you understand market challenges and opportunities and give you a view into the future of IIoT

  • Government orgs: those that support entrepreneurs to start and grow their business

And finally, there’s celebrities, music, comedy, food and networking  as part of the socializing and entertainment that this event is known for. If you’re in the IIoT space I strongly recommend that you attend this event.  To learn more about McRock Capital and the upcoming IIoT Symposium check out my interview with co-founder and Managing Director Whitney Rockley.

Tags: Conversation Series

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Silicon Halton is a grassroots high tech community focused on Technology, Community, and Growth