"The government claims that owners of private corporations — small entrepreneurs, doctors, farmers, lawyers, famous novelists, filmmakers — are using their corporate structures to gain a tax advantage. Money is being tucked into private corporations where it produces “passive” returns at low tax rates that are unfair to the rest of us.
Exactly how much money is slithering around private corporations is unclear. Some $27 billion in “passive income” is said to exist within private corporations that are taxed at lower rates. We know for certain, however, that when it comes to tax neutrality, owners of private corporations are mere tiny fish swimming among the tax-avoiding whales. Millions of Canadians use equivalent passive-investment vehicles to duck billions in taxes on personal and investment income every year. They’re called pension plans.
Finance Canada estimates the annual tax loss from the tax-free operation of registered government and corporate pension plans will cost Ottawa $37 billion this year. When Canadians put money into the plans, they pay no tax on the contribution ($16 billion annual lost revenue) and the earnings in the plans accumulate tax-free ($21 billion in lost revenue). The pension benefits paid out are taxable ($11 billion revenue gain), totalling a net tax loss of $26 billion."