POLITICS

NDP Would Close Small Business Tax Loopholes, Just Like The Liberals

09/17/2015 10:13 EDT | Updated 09/19/2015 07:59 EDT

OTTAWA — The NDP is going after high-income earners who use small business to stash their money and save on their taxes — the very thing they accused Liberal Leader Justin Trudeau of being improperly concerned with last week.

"Justin Trudeau's insulting attitude toward small business in Canada shows he really doesn't have a clue about the realities of the Canadian middle class," NDP Ontario candidate Charlie Angus said in a press release Saturday.

"[Trudeau] claims that a 'large percentage' of small business owners use their businesses as a means to cheat on their taxes...New Democrats know that small business is a way of life, and the people who run small businesses are the engine of our economy. They know what it means to play by the rules and work hard to feed their family," Angus said.

But in NDP's fiscal plan, released Wednesday, the party outlined income of $500-million a year from what it calls "tax integrity measures" such as funds from offshore tax havens as well as income from cracking down on Canadians that use loopholes to shelter their income — the very problem Trudeau highlighted in an interview with CBC's Peter Mansbridge.

"[W]e have to know that a large percentage of small businesses are actually just ways for wealthier Canadians to save on their taxes, and we want to reward the people who are actually creating jobs, and contributing in concrete ways," Trudeau said, in an interview that aired on Sept. 8.

Although the Liberal leader said he supports dropping the small business tax rate to 9 per cent from 11 per cent, Trudeau said he wanted to do a "little tweaking" around the tax cut to ensure it was done in the right way.

Wednesday, the NDP agreed.

"We will ensure that high-income individuals are no longer able to use Canadian controlled private corporations (CCPC) to inappropriately engage in income splitting and close other related loopholes that allow some high income individuals to shelter income in CCPCs," the NDP’s fiscal plan states. "This figure has been estimated by Michael Wolfson at an annual price tag of approximately $500 million."

Wolfson is an University of Ottawa professor who has worked in the finance department. In an interview with CBC last year, he said he believes most Canadian private corporations are legitimate businesses but that some wealthy individuals use them to avoid paying taxes.

"It requires more study. How much of it is legitimate and how much of it is tax avoidance?" he told CBC.

Wolfson noted earlier this year in an interview with The Globe and Mail that the NDP and the Conservatives, who were proposing to lower the small business tax rate, should be concerned with this tax leakage from people, such as doctors and lawyers.

Thursday, NDP Toronto candidate Andrew Thomson, a former finance minister in Saskatchewan, said the party did not believe as Trudeau suggested that a "large percentage" of small businesses were using private corporations as tax havens and cheats.

"It's about 1 per cent, that is not by any means a large percentage as Mr Trudeau [said]," Thomson said, defending the NDP's move. "One per cent is a tax leakage that we do intend to close, so $500 million I think that is a reasonable approach."

The NDP has known about the problem with its policy for months — but initially it seemed unconcerned about the side effects of the tax cut. Saturday, Angus said “tweaks” might be necessary to deal with exception cases like Trudeau.

Last week, the Ottawa Citizen found Trudeau was once involved in three numbered companies, including one he used to receive income from public speaking engagements between 2006 and 2011 that were reportedly worth $1.3 million.

The NDP suggested he might know a thing or two about tax avoidance.

When asked about it on the campaign, Trudeau didn't deny using a small business to avoid paying higher taxes. He said he "followed all the rules."

The Conservatives, which trumpeted the small-business tax cut in its April budget, have suggested Trudeau’s comment show he is out of touch and is deeply hostile to private businesses.

“[I]magine that someone seeking to be prime minister – Justin Trudeau – would casually assert and refuse to retract a statement that a large percentage of small businesses are just tax avoidance schemes for the wealthy,” Harper said during a campaign stop in Ottawa’s west-end on Sunday.

"Look around you – 45 men and women building industrial equipment," Harper told faithful supporters at gathered on the shop floor of air ventilation manufacturer Tamco. "Businesses like this are no tax scam. ... They are the backbone of the Canadian economy."

Thursday, they released a video with small business owners who suggested they were baffled and offended by Trudeau’s comments.

-With a file from the Canadian Press.

See also: 4 Key Points About The NDP's Fiscal Plan

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