Personal Finance

Trudeau going after Personal Services Corps disguised as small businesses

  • Last Updated:
  • Aug 24th, 2018 11:56 am
Deal Addict
May 22, 2003
2818 posts
1231 upvotes
Vancouver
http://business.financialpost.com/opini ... -swim-free

"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."
Deal Addict
Nov 9, 2013
2368 posts
999 upvotes
Edmonton, AB
Jermyzy wrote:
Oct 5th, 2017 11:30 pm
http://business.financialpost.com/opini ... -swim-free

"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."
Well I guess Trudeau better do away with the RRSPs! I always thought they were sexist anyways. It's 2017!
Deal Fanatic
Feb 9, 2009
6394 posts
3550 upvotes
Cant wait for Libs to be out in 2019... people are already sick of Trudeau... bring back the cons to save the day!!!

Singh and Trudeau will eat at each other's voters... cons will take it.

need them back immediately! anyone who advocates more tax is plain and simple a brainwashed STUPID ***** IDIOT!
Deal Addict
Nov 13, 2013
1284 posts
489 upvotes
OTTAWA
Sanyo wrote:
Oct 6th, 2017 12:18 am
Cant wait for Libs to be out in 2019... people are already sick of Trudeau... bring back the cons to save the day!!!

Singh and Trudeau will eat at each other's voters... cons will take it.

need them back immediately! anyone who advocates more tax is plain and simple a brainwashed STUPID ***** IDIOT!
A bit of a simplistic argument no? So the ideal tax rate is zero?

Polls are tightening but you really think Scheer can pull off even limiting Libs to a minority in 2019?
Newbie
Mar 5, 2017
2 posts
1 upvote
Once these tax changes go through let see what Mr. Selfie boy and Offshore Morneau are going to do to prevent the brain drain or unemployment!

People who are able to leave will leave, the others who can't will file bankruptcy.

Keep your envy and hate towards the small business owner off the the forum and watch the video:

http://www.bnn.ca/billionaire-seymour-s ... e-1.869864
Deal Addict
Oct 7, 2007
3835 posts
1135 upvotes
This government is writing cheques so fast that they will slowly tax all the money out of everyone to pay for their parties (Canada 150 cost half a billion dollars) and other things. Every decision they make costs taxpayers at least a billion dollars. There won't be anything left by 2019.
Deal Addict
Jan 27, 2015
1021 posts
442 upvotes
Edmonton, AB
Sanyo wrote:
Oct 6th, 2017 12:18 am
Cant wait for Libs to be out in 2019... people are already sick of Trudeau... bring back the cons to save the day!!!

Singh and Trudeau will eat at each other's voters... cons will take it.

need them back immediately! anyone who advocates more tax is plain and simple a brainwashed STUPID ***** IDIOT!
As much as I dislike most of Trudeau's policy, Jaggy Singh is a really bad news for the economy. Have you seen his platform?! It's socialism on fire.

NDP at the Federal level has never won in the past, but they have a slight chance; Jaggy Singh will take a few votes but I still maintain that T2 will still be in power for another term. Why? Andy Scheer. Trudeau will mop the floor with Scheer.
Deal Addict
Jan 27, 2015
1021 posts
442 upvotes
Edmonton, AB
asa1973 wrote:
Oct 5th, 2017 10:41 am
After being beaten for starting social war with their "middle class fairness" they decided to go on more guaranteed way of "gender fairness"



Gender-equal tax system? WTF? The whole "western" tax system is based on ~income, NOT a social status or gender. Are we going back to feudalism or "some animals are more equal than others" ?
This is a simple vote garnering gesture: by being more "progressive", the Liberals are trying to gain votes for those that would've otherwise voted NDP. Simply brilliant strategy by Liberals (not that I agree with it).
Deal Addict
May 22, 2003
2818 posts
1231 upvotes
Vancouver
So theoretically, could small business owners not create a trust as a shareholder of the business and transfer shares from business owner to the trust and have passive investments grow in the trust fund? The investments would then be protected from the new passive income tax rules like Trudeau's/Morneau's trust funds. Only downside is the added expense to create/administer the trust fund which may not be worthwhile for smaller businesses.
[OP]
Deal Addict
Jun 27, 2015
1120 posts
84 upvotes
East York, ON
Jermyzy wrote:
Oct 6th, 2017 3:58 pm
So theoretically, could small business owners not create a trust as a shareholder of the business and transfer shares from business owner to the trust and have passive investments grow in the trust fund? The investments would then be protected from the new passive income tax rules like Trudeau's/Morneau's trust funds. Only downside is the added expense to create/administer the trust fund which may not be worthwhile for smaller businesses.
That is exactly what I am thinking of.
Find more people who are incorporated and find a legal way for all of us to work for the same business company and then continue to do all the things we used to do when we each had our own business.
The numbers will get us in the major leagues and potential savings can be achieved by sharing expenses
Deal Expert
Feb 29, 2008
19576 posts
2154 upvotes
Montreal
The trust strategy already exists. They have to pass legislation to stop this, or every one will do it. I have always held off due to the costs of an estate freeze and lawyer fees. Now it's looking better and better.

But I believe the trust needs empty it's coffers by Dec 31st so it solves the dividend splitting issue but not the retained income issue.
Deal Addict
May 22, 2003
2818 posts
1231 upvotes
Vancouver
Well I'm in the process of restructuring my company anyways as our original accountant didn't set up our corporation properly and we have to do an estate freeze anyways. This is one of the options that was suggested to us, however we don't have any children yet and I don't think I can be both settlor and beneficiary haha!
Deal Expert
Feb 29, 2008
19576 posts
2154 upvotes
Montreal
Jermyzy wrote:
Oct 7th, 2017 12:32 pm
Well I'm in the process of restructuring my company anyways as our original accountant didn't set up our corporation properly and we have to do an estate freeze anyways. This is one of the options that was suggested to us, however we don't have any children yet and I don't think I can be both settlor and beneficiary haha!
You can name your spouse, and future children as beneficiary, without naming them. So if you have children in the future it's a possibility.
Sr. Member
Jul 20, 2017
510 posts
111 upvotes
Jermyzy wrote:
Oct 7th, 2017 12:32 pm
Well I'm in the process of restructuring my company anyways as our original accountant didn't set up our corporation properly and we have to do an estate freeze anyways. This is one of the options that was suggested to us, however we don't have any children yet and I don't think I can be both settlor and beneficiary haha!
can you recommend some good link/book about the process. I usually like to understand things before I go to a professional

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