Small Business Month

C M Y K 3 S M A L L B U S I N E S S M O N T H - S U P P L E M E N T T O T H E W I N N I P E G F R E E P R E S S - T H U R S D A Y , O C T O B E R 1 9 , 2 0 1 7 The Chambers Plan is administered by Johnston Group. Based in Winnipeg, Johnston Group is dedicated to enriching the community, contributing significantly to our local youth programs, health, arts, sports, and many other organizations. We're very proud to also support Manitoba's small business community. Your business is always changing. And so are your employee benefit needs. johnstongroup.ca The Chambers Plan provides employee benefit solutions to 30,000 small businesses in Canada. We see first-hand the amazing entrepreneurs we have in this country and you inspire us with your passion. Get the plan that adapts with you. Visit chamberplan.ca It's for your benefit. By Mark Halsall for the Free Press T he Trudeau government sent shockwaves through Canada's business community this past summer when it announced plans to change the way small businesses are taxed. Here in Manitoba, companies like Points West Technologies are among the thousands of businesses that could be affected by the proposed changes. The owners of the small Winnipeg firm, Greg and Jennifer Borsboom, are still coming to grips with the move. "The ground has shifted underneath small business," Jennifer Borsboom says. "More than half the people that we're friends with are small business owners, and everyone's feeling different levels of panic." On July 18, Ottawa announced a package of changes to small business tax rules as well as a formal consultation period which ended Oct. 2. The proposed changes target what's called "income sprinkling," which allows business owners to distribute income to other family members. The government has proposed a "reasonableness test" to determine whether family members are active participants in the business. The proposed changes also include altering existing methods of converting business income into dividends and capital gains as well as the way passive investment income earned by private corporations is taxed. The federal Department of Finance maintains the overhaul is needed to make the system fairer and to close tax "loopholes" that primarily benefit high- income Canadians. The Canadian Federation of Independent Business, which lobbies government on behalf of small business owners, believes the proposed changes will have a much broader impact. In a statement released Oct. 2, CFIB President Dan Kelly said there's strong evidence from tax professionals that the reforms "will affect middle-income business owners with as little as $50,000 in income." Kelly called on the government to drop the proposed SMALL BUSINESS COMMUNITY WARY OF PROPOSED TAX CHANGES changes and start over by working with the business community to ensure there are no abuses of the income tax rules. Jonathan Alward, the Manitoba director with the CFIB, criticized the government for using language like "loopholes" that cast small business owners in a negative light. "[It implies] small business owners who are using these tools for legitimate purposes are doing something wrong, and simply that's just not the case," he says. "They were set up for a reason." Alward stresses that the current small business tax rules are long-standing practices that help companies grow, and that the reforms proposed by Ottawa will have far-reaching consequences. "We've heard loud and clear from our small business members across Manitoba and elsewhere in the country that these tools are used for so many legitimate reasons every single day," he says. "These changes are going to have multiple impacts on pretty much every small business across the province," Alward adds. "It's not only the small business owners, but their families and their employees that in one way or another are going to be directly or indirectly impacted." Alward warns the proposed changes could hurt the economy by making it more difficult for small business owners to invest in their companies. Borsboom agrees, and says her company is a good example. Points West Technologies, which supplies components for manufacturers of agricultural and industrial equipment, recently used money set aside in passive investments to expand the business. Borsboom says the company had been renting space but purchased its own building to prepare for future growth. It's a move she maintains likely wouldn't have been possible under the proposed new tax rules. "If we knew this stuff was going to happen, I don't think we would have bought our building," Borsboom says, adding that if changes do go through, it will impact the company's future growth plans. "It's definitely a different picture than what it was before, and in terms of expansion past this point, it's anybody's guess. We're definitely not going to be focusing ahead in the way we were [before]," Borsboom says. "We took a leap and took on a big mortgage for this building with the hopes of aggressively paying it off and wanting to hire another couple of people in addition to the two people that we did just hire," she adds. "We have to relook at all that now." ❚ Jonathan Alward of the Canadian Federation of Independent Business says proposed federal tax changes have cast small business owners in a negative light. Photo by Darcy Finley

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