Letter to the Editor - Trudeau: Please Save Our Family Business
Small businesses are the foundation of our country. The significant role they play in our national economy is incomparable. We all know the statistics – 98% of businesses in our country have less than 100 employees. That represents 1.3 million businesses across Canada. And guess what is happening to most of these business owners? They are baby boomers and they are getting ready to retire. The Canadian Federation of Independent Business (CFIB) released its November 2018 report “Getting Succession Right” and it states more $1.5 trillion dollars of assets are set to transfer over the next decade. That’s 72% of all current business owners planning to leave their business in the next ten years. But here’s the scary part – only 8% of those people have a formal succession plan.
Why should we all be paying attention? Its simple. Small businesses account for 99% of all business in Canada. Any industry that has that sizable of a contribution to our national economy is something we all should be paying attention too. We should be paying attention to what role we and our governments have in supporting this industry and ensuring its stability. Literally, our country depends on it. When we look at this industry and work to support its stability, we are faced time and time again with why there is such an obvious error in how our federal Income Tax Act currently reads. It is designed to destroy our families who have worked hard to build businesses.
Here’s the problem. When a business owner looks to retire and wants to transfer his or her business to their son or daughter, that transfer is taxed as a dividend. That is the difference between the sale of a business and the price originally paid for the business. But guess what? That same business could be sold to a stranger and it’s considered a capital gain, which makes it eligible for a lifetime capital gains exemption (LCGE). To date, we have been given no clear answer as to why this glaring error exists. In Trudeau’s defense, the Federal Income Tax Act has had this flaw in it for years. But we do deserve to know what the rationale is behind penalizing business owners from transferring their business to the next generation. Shouldn’t we all be working towards doing all we can to protect our family businesses?
Family businesses make up a massive portion of small businesses nationwide. A family-owned business employs more than 6 million people in Canada and contribute over 60% to our GDP. And those new jobs the federal government talks about in their economic reports? 70% of new jobs created annually in Canada are created by family businesses. And those same family run businesses give $1.5 billion to charity. It sure sounds like an industry we would all benefit keeping around.
To be fair, there is an exception in the farming community. The direct transfer from one generation to the next can happen tax free. This should be the case for all family business. How can our government stand silent on this when our nation is faced with such staggering statistics about what’s happening in our economy? Let’s keep our fingers crossed on March 19 our federal government keeps its promise to stand up for families and stand behind the family run businesses.