Yesterday, the Department of Finance released their much
anticipated consultation paper Tax Planning Using Private Corporations.
Because the Liberals referenced this consultation paper in their
2017 Federal Budget, the overall attack on tax planning for private
corporations does not come as a complete surprise to the accounting
community. However, the extent of the proposed changes to the tax
rules are more significant than expected.
The rhetoric throughout the consultation paper is strong. The
government repeatedly notes that they are "closing
loopholes" and "increasing fairness", and in
addressing the latter, the paper compares the after-tax earnings of
an employee to the after-tax earnings of a small business
owner. Ultimately the Liberal's proposed tax measures are
aimed at eliminating private corporation tax planning strategies,
such as dividend income splitting, lifetime capital gains exemption
planning and the use of corporate tax deferrals to make
