The CFIB says the rules are not clear
The Canadian government’s rules on income sprinkling are confusing and overcomplicated.
That’s the view of the Canadian Federation of Independent Business (CFIB) which reacted Thursday to a new report on the issue published by the Parliamentary Budget Officer (PBO).
The PBO said that the finance minister had set out certain scenarios in which dividends paid to family members would not be considered income sprinkling. But it was “unable to clearly identify the individuals who will be subject to the TOSI rules. Instead it analyzed the impact using 3 scenarios.
"In addition to finding the government will be taking twice as much from businesses than projected just days ago in the 2018 budget, the PBO report reveals it is nearly impossible to figure out who will be potentially affected," said Dan Kelly, CFIB president. "If Finance and the PBO struggle to figure out who will be whacked with higher taxes, God help us when this hits the CRA!"
"Quite apart from the increased tax burden these measures bring to family-run businesses, our even bigger concern is that small firms will have no idea whether they will ultimately pass the tests or not," added Kelly. "Once the audits start in a few years from now, business owners are not going to have the documentation to prove whether or not they pass the 'bright line' or 'reasonableness' tests, resulting in added red tape and years of tax court battles across the country."
The CFIB is urging the government to delay the changes by a year to allow for a full assessment of the impact.
