November 6, 2017
Dear Friends and Neighbours,
Thank you for sharing your concerns regarding proposed changes to Canada’s tax regime. I have represented these views to Minister Morneau in person, as you know, and in public. Here is the government’s revised approach to tax reform, as I understand it, based in large part on your valuable input. Our tax policy is intended to incentivize small business and business investment, and to put small business at the heart of our domestic and international trade agenda.
A. Outcome of consultation:
- Small business taxation will be reduced from 10.5% (2016) to 9% (2019). This means that Canada Controlled Private Corporations will benefit from a corporate tax rate that is at least 12 percentage points lower than our largest trade partner, the United States, and that is the lowest of the G7 countries.
- Simpler, clearer rules for applying income sprinkling to family members 18 years and older. Businesses can continue to income sprinkle, with new criteria for the meaningful contribution by a family member to the business. 
- Lifetime Capital Gains Exemption will remain unchanged. Individuals in a family business will continue to have access to the Lifetime Capital Gains Exemption.
- Conversion of income into capital gains remains the same. There is no change to this legislation.
- All previous passive investment in a corporation is grandfathered in and will not be taxed. There is no change to the status of accumulated passive investment. Currently, the Department of Finance is proposing that as of January 1, 2018 companies will be permitted $50,000 annual interest income (reflecting the interest/dividend on an approximate threshold of $1,000,000 annually depending on rate of return) to be held as passive income and not taxed. Income kept inside the corporation for the purpose of business investment and resiliency due to unforeseen circumstances are not considered passive income and not subject to the new proposed rules.
B. For further consultation:
- Angel and venture capital investors will be incentivized to continue to invest in startups and small business.
- For the family transfer of business the previous rules apply. The government will consult on the Lifetime Capital Gains Exemption to help family business transfers, including farmers and fishers.
Your ideas have made a big difference, and are always welcome.
Pamela Goldsmith-Jones, MP
West Vancouver-Sunshine Coast-Sea to Sky Country
Cc. The Honourable Bill Morneau, Minister of Finance
 The Government will introduce reasonableness tests for adult family members aged 18-24, as well as those 25 and older. These adults will be asked to demonstrate their contribution to the business based on four basic principles – whether they have made a contribution through any combination of the following: labour contributions; capital or equity contributions to the business; taken on financial risks of the business, such as co-signing a loan or other debt; and/or past contributions in respect to previous labour, capital or risks.