Small businesses muster to challenge Liberal tax plan

Some Ottawa small business owners are spoiling for a fight over the federal government's proposed changes to the tax code affecting corporations.

Michael Burch, a managing partner at Welch LLP, spoke toa crowd of about 250 people at the BayviewYards Innovation Centre Thursday night. He said it was an opportunity to "band together" against the changes, which could result in "double-taxation" for entrepreneurs.

Burch quoted Prime Minister Justin Trudeau, sayinghe would "make no apologies" for the proposed changes aimed at making the system fairer forthe middle class.

Those were "fighting words," Burch said as he pulled out a pair of oversized red boxing gloves.

"I want you all to go home right now get your pitchforks, get your shovels and come back here and in an hour we're going to storm the Hill. Are you with me?" He got somelaughs andapplause from the crowd.

The changes could hurt the middle class by eliminating jobs and reducing hours at small businesses that employ 90 per cent of Canadians, he said.

• How proposed changes to Canada's tax system could hit small business

The group was mostly small- and medium-sized business owners and people concerned with the tax changes that wanted more information, according to the Ottawa Chamber of Commerce, which organized the event.

3-part reform plan

Jeff McConnery, a partner at Welch LLP, gave a presentation on how the proposed tax changes would affect small business owners, especially ifthey tryto transfer their business or assets within their family.

Finance Minister BillMorneauhas said the changes are about fairness and going after individuals who are using incorporation to avoid the higher personal income tax rate.

• Morneau says tax system allows some wealthy Canadians an unfair advantage

The reforms discussedincludeeliminating income"sprinkling," which allows incorporated small businesses to shift income to family members who don't necessarily work for them and get taxed at a lower rate.

Another reform is reducing the use of private corporations to make passive investments in stocks and real estate.A third reform would eliminate the ability to convert a corporation's earnings into capital gains, which are taxed at a lower rate.

The changes could make it more expensive after taxto sell a business to a family member than to an arms-length party,McConnery said.

'Not just the rich people' affected

Staycie Keetch, owner of the Eyes on Ottawa video production company, saidthe changes will have a broader impact on business owners than onthe doctors who have been grabbing headlines in opposition.

"Alot of people that own and run small businesses have pizza shops and are hairdressers and they happen to be incorporated to run their businesses," she said.

"I don't think the general public understands that these people are being affected. It's not just the rich people who are in big houses."

The tax changes will likely impacthow she structures her family-run business and whether she passes it on to family or sells it in the long term, Keetchsaid.

She's offering the services of her company to get the message out.

Consultation runs until Oct. 2

Ed Wigfieldsaid he's worried thatwhile the reforms are supposed to crack down on individuals using private corporations to avoid higher personal tax rates, his financial advice startup could be affected.

"I don't have a corporation just to hold onto personal income, but I worry as they're targeting that... that a corporation with employees can get caught in those same tax laws, in those same tax rules," he said.

That could lead to having less cash-on-hand in lean timesto pay himself after he's paid his employees, and that could lead to a reduction in his staff, he said.

The Ottawa Chamber of Commerce provided the crowd with information about contacting their MPs, and gave them a model advocacy letter from the Canadian Chamber of Commerce.

The government's consultation runs until Oct. 2.