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Canadian entrepreneurs divided over fairness and impacts of proposed small business tax changes

As Prime Minister Trudeau’s government doubles down on plans to change the way Canadian small business owners are taxed, entrepreneurs themselves are divided on the potential impacts of two of the most significant amendments – a divide driven largely by the size of their own ventures, and the amount of risk their businesses are carrying.

A new public opinion survey from the Angus Reid Institute – conducted in partnership with MARU/Matchbox – canvassing both entrepreneurs and Canadians who don’t own businesses finds neither blind support for the government’s so-called “tax fairness” agenda, nor blanket outrage suggested by the fiercest opponents of proposed changes.

Small business owners do not react in a monolithic way to the amendments.

Fewer say alterations to income sprinkling will negatively affect their business (24%) and are unfair (44%).

However, when it comes to changes dealing with passive investment income, the perceived negative impact among business owners is higher (42%), as is the view the changes are unfair (55%).

Overall, Canadians are evenly divided as to whether the changes will make the tax system fairer or harm business investment. Households where someone works for small businesses lean more to the latter view.

Key Findings: 

  • Nearly two-thirds of small business owners (63%) say proposed changes to income sprinkling will have “no impact” on them. One-quarter anticipate a negative impact (24%)
  • On the “fairness” of rules to restrict income sprinkling – just over one-third of the entrepreneurs surveyed see the change as fair (36%), while a plurality view it as unfair (44%). The rest aren’t sure
  • Proposed changes to passive investment rules are seen as unfair by a margin of more than two-to-one over small business owners who think it is fair (55 per cent versus 22 per cent).
  • Small business owners are near-evenly divided about the potential impacts of passive investment amendments: 42 per cent say they will be negative, the same number (43%) say “no impact”
  • Small businesses with five or more employees are the most likely to anticipate harm to their ventures over the proposed measures. These respondents are found more in the retail and manufacturing sectors where capital may be a more essential component of their business operations
  • Just over half (54%) of non-business owners surveyed say professionals who incorporate – such as doctors – shouldn’t be eligible for the same tax advantages as other small businesses. This falls to 41 per cent among small business owners
  • Small business owners emerge as figures of respect: 68 per cent of Canadians disagree with the statement “the role small business in the economy is overrated”
  • Canadians are split down the middle regarding the overall impact of the proposed changes: half (50%) say they’ll make the tax system fairer. They other half (50%) see them as harming business investment. Among households where someone works for a small business, this latter view rises to 61 per cent.

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