TORONTO, June 20,
2024 /CNW/ - Half of Canada's small business owners will be hit by
the new 66.7% inclusion rate hike coming into effect on
June 25, warns the Canadian
Federation of Independent Business (CFIB).
Despite government's claim that the rate would affect only a
tiny share of the wealthiest Canadians, over half (55%) of small
business owners say it will affect the eventual sale of their
business, 45% say it will affect the investments they hold
privately, and 41% say it will affect investments held within their
incorporated businesses.
"Even the federal budget admits that 307,000 Canadian
corporations had net capital gains in 2022 alone. Like individual
Canadians, companies often record capital gains as a one time or
occasional event, not every year. The impact of the hike in the
inclusion rate needs to be measured over the long term, not just in
any one given year," said Dan Kelly,
CFIB president.
While the federal government has proposed a welcome increase in
the Lifetime Capital Gains Exemption, this will not help business
owners who sell the assets, rather than the shares, of their
company. In addition, business owners who hold investments within
their corporations for the owner's retirement or for reinvestment
in the company will be hit by the 66.7% inclusion rate on any
capital gain as corporations are ineligible for the $250,000 annual allowance at the 50% level.
"With details of the changes in the inclusion rate only coming
out in last week's Ways and Means Motion, business owners were only
given two weeks to make informed decisions, leaving virtually no
time to change gears. And details of the proposed Canadian
Entrepreneurs' Incentive have yet to be published, leaving
entrepreneurs largely in the dark on this potentially beneficial
change," Kelly added.
CFIB continues to push the government to:
1. Scrap the planned increase in the general
inclusion rate to 66.7%. If government is unwilling to abandon this
plan, it should:
- Grandfather all existing capital gains using a V-Day
(valuation day) as was done in 1971
- Allow corporations to benefit from $250,000 each year at 50% inclusion like
individuals
- Allow for 5-year income averaging to benefit from the
$250,000 annual threshold for larger
capital gains for irregular events, like selling a property
2. Expand the new Canadian Entrepreneurs'
Incentive to include all entrepreneurs:
- Include all sectors, including farmers and fishers selling
assets
- Include non-founders to encourage people to invest in small
firms
- Cut the 10-year implementation schedule in half
Read CFIB's letter for a full list of recommendations on the
proposed capital gains changes.
Methodology
Final results for the CFIB Survey –
Upcoming Changes to Capital Gains Tax. The online survey was
conducted from May 2 - May 17, 2024,
number of respondents = 2,335. For comparison purposes, a
probability sample with the same number of respondents would have a
margin of error of at most +/-2.0%, 19 times out of 20.
About CFIB
The Canadian Federation of Independent Business (CFIB) is
Canada's largest association of
small and medium-sized businesses with 97,000 members across every
industry and region. CFIB is dedicated to increasing business
owners' chances of success by driving policy change at all levels
of government, providing expert advice and tools, and negotiating
exclusive savings. Learn more at cfib.ca.
SOURCE Canadian Federation of Independent Business