Willis is concerned how the proposed federal tax changes will impact the transaction of selling the business to his children.
“It would almost be double the tax for us to do that,” said Willis, who owns Kays Wholesale Inc. and Island Chemicals in Charlottetown with Green.
The proposed changes for the 2018 federal budget were released in a consultation paper this summer.
Some of the recommendations involve income shifting to family members in a business subject to a lower tax rate, limiting passive investments and the rules around converting business income (salary or dividends) into capital gains. The concern with the last proposal is it could increase taxes when a business is sold.
Cameron Beach, owner of Canadian Tire in Charlottetown, calls the proposals “taxing wealth rather than encouraging wealth.” In particular, Beach said he is troubled by Finance Minister Bill Morneau’s comments that business owners making less than $73,000 will not be impacted by the changes and the message being sent to independent business owners about the incentive to grow their business and their income.
“Once you start making over $73,000, we’re going to tax you some more. You know, what incentive is that for someone to work 80 hours a week, seven days a week, give up all those benefits?” he said.
“I like to work hard, but I want to make sure that I have independence – that I can give my staff a healthy profit-sharing plan and benefits. I want to go back and give to the community in hundreds of ways. But, I can only do that by putting more dollars in the till and having a healthy bottom line and being encouraged to give back to the community.”
Willis said another proposed change, involving the use of passive investments, is not an immediate concern since the company is currently reinvesting its profit into expanding Kays Wholesale.
But in general, Willis said higher taxes could impact his ability to hire new employees as well as donate to charities.
Also, as a business owner, Willis noted a lot of sacrifices and sleepless nights were involved when he and his wife left their jobs to go into business. And, the reality of being a business owner is he isn’t able to access employment insurance benefits due to loss of work or have access to a benefit plan or paid sick days.
“There has to be some incentive in the tax rules that allows a business owner to save for those things. I have to retire someday too, right,” he said.
“If people are not going to have any ability to save outside of their business, I’m not sure how many people are going to risk getting into business.”