OTTAWA – Facing external pressure from concerned constituents and anxiety among business owners over what the outcomes of the federal government's soon-ending consultation period will be on its proposed tax changes, Finance Minister Bill Morneau said there will be more time to hash out the ultimate tax reform proposal once it’s before Parliament.
"What we’ve got right now is a consultation period on two pieces of draft legislation. We still have another piece of legislation to write, so there will be additional ability for people to have comments on that." said Morneau, following an appearance before the House Finance Committee Thursday where he fielded questions from both sides about the federal government's contentious tax reform proposal.
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In July, Morneau announced the plan to close three loopholes which the government says have allowed high-earning business owners to avoid higher tax rates.
The changes will target so-called "income sprinkling," which allows a business owner to split his or her income among family members, whether they are involved in the business or not. The government also wants to change methods of converting income into dividends and capital gains, and limit passive business income taxation.
The government has already drafted legislation on the income sprinkling and capital gains changes, but is left to write its plan on passive investment. Morneau has said the government is open to changes to avoid potential unintended consequences of the reforms.
On Thursday, he was not able to offer any information on the potential timeline of when the changes will be finalized and proposed after the Oct. 2 consultation window closes.
"It’s incumbent on us to make sure that we consider the feedback that we’ve received," said Morneau.
NDP finance critic said Morneau’s answers at committee were "vague," which he said is only adding to the uncertainty.
Conservative MP and finance committee member Dan Albas called the government’s solicitation of feedback a "drive-by consultation," and questioned whether the minister has actually been listening.
"When you do not acknowledge the criticisms both in the public sphere as well as what happens in the House of Commons. If you do not acknowledge that these things are there, you are not perceived to be listening," said Albas.
During Thursday's meeting, the opposition took a number of lines of questioning about the proposal and its potential impacts on small and medium sized businesses while major corporations remain untouched.
Morneau also received a plea from one Liberal MP.
Liberal MP Raj Grewal referenced the concerns being raised in ridings across the country over these proposals and suggested to Morneau that once the eventual legislation is brought before Parliament, that it be done with an emphasis on clarity.
"The Income Tax Act is very complicated and whatever we end up—when legislation does come forward, to make sure it’s clear, fair, and predictable… We don’t want to over complicate things," Grewal.
Generally, Morneau offered the same message, saying the Liberals will forge ahead with its aims for tax fairness.
"As the economy grows Canadians need, and deserve to know that their tax system is fair. So right now we’re just pointing out that it’s not," he said Tuesday.
Senate committee also studying
The Senate national finance committee is also studying the set of proposed changes, and senators say it's a chance to cut through the rhetoric and get to the bottom of the potential impacts of the Liberals' proposal.
The committee, according to the motion, is studying the changes and will be making note of the potential impact of the proposed changes on incorporated small businesses and professionals, economic growth and government finances, and the fairness of taxation of different types of income.
The Senate committee has been given a Nov. 30 deadline to complete the study and report back to the Senate.
