This is a paper that focuses on the merits of Finance Minister Bill Morneau’s statements. The paper also discusses the tax fairness discussion in the assignment paper.

The merits of Finance Minister Bill Morneau’s statements

ASSIGNMENT 1 – All things Chapter 12

Problem 1
Part A 10 points
Recently, the federal government used “tax fairness” to defend its proposed changes to the small business deduction. Effective for taxation years after 2018, CCPCs will see a reduction in their small business deduction limit when they have significant passive income. For CCPCs (and all their associated companies) with passive investment income in excess of $150,000, the entire small business deduction will be eliminated.

The changes were in 2018 following statements made by Federal Finance Minster Bill Morneau. He has said “income tax reforms are needed because small business owners have an unfair advantage…” In the article available at: Morneau is also quoted as saying “the current system means business owners who incorporate their companies pay lower taxes while a second class of citizens ends up with a higher tax bill.”

Discuss the merits of Finance Minister Bill Morneau’s statements. Do you agree or disagree with Morneau’s statement that low corporate tax rates provide tax loopholes for individuals. Also, provides an unfair advantage for small business owners? Are small business owners synonymous with their businesses for tax purposes?

Part B 4 points:
Given the events of COVID-19, do you agree or disagree with the recent changes to the small business deduction? Discuss whether the Government of Canada should maintain or repeal the limits on the small business deduction because of excess passive income.

The merits of Finance Minister Bill Morneau’s statements

Problem 2 10 points:
Discuss tax fairness by considering and discussion the rules of the Additional Refundable Tax & RDTOH that apply to CCPCs in comparison with international tax treaties such as the Barbados-Canada tax agreement. Hint: We haven’t discussed the Barbados-Canada tax agreement, but focus on the effects on investment income.

Problem 3 10 points
Discuss whether you agree or disagree with the objective of integration. Consider the advantages and disadvantages of incorporating versus earning income as an employee. Should tax regulators aim to equate the taxes paid on income within a small business corporation to the income earned as an individual? Should earning income using a small business be an equation with earning income as an individual via employment or property income?

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