We have many small family businesses and small businesses in the Okanagan, Similkameen and Nicola valleys.
If an entrepreneur decides to sell to another family member at retirement in order to pass the company on to the next generation, the difference between the selling price and the original purchase price counts as a dividend.
If the same family business or small business is sold to a stranger, the difference between the selling price and the original purchase price counts as a capital gain.
Both dividends and capital gains are taxable. The difference is that capital gains are generally taxed lower than dividends.
So if you sell your family business or an associated small business to a family member, you will be penalized for it, compared to selling to a non-family member who would pay lower taxes on the sale.
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My Conservative colleague, Representative Larry Maguire of Brandon-Souris, felt this tax approach was not fair and tabled Bill C-208 for private members: “A bill to amend the Income Tax Act (Transfer of Small Businesses or Family Businesses or Fishing Businesses).”
Bill C-208 proposes that the Income Tax Act be amended so that the same tax rate should apply when selling a business to a family member as it is when selling it to a third party.
Unfortunately, Prime Minister Justin Trudeau, the Treasury Secretary, the Liberal Cabinet and the majority of Liberal factions all voted against this law, which promotes tax justice for families.
Fortunately, all members of the Conservatives, the New Democratic Party, the Québécois Bloc, the Green MPs and some surviving liberals voted for this bill, which allowed it to pass the third reading by 199 votes to 128. Bill C-208 received royal approval and was passed into law on June 29th.
Although this bill is now in effect, the government is refusing to implement the bill immediately, noting that “the government is proposing to introduce legislation to make it clear that these changes will be made at the beginning of the next tax year, beginning on the 1st.”
The serious concern is that the law has already been passed, although the current Liberal government does not support it.
This action undermines and disregards the will of the people through an elected parliament.
I believe the Prime Minister believes that by postponing this bill until after a federal election, when the Liberal government wins a majority, he can overturn it.
I believe this bill, which is now law, should be implemented immediately. If a future majority government wants to reverse these changes to the income tax law, it could try to do so through a democratic process.
Using the bureaucracy to delay and essentially block this bill is an arrogant affront to democracy.
My question this week: do you agree?
Dan Albas is MP for Riding Central Okanagan Similkameen Nicola.
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