Finance Minister Bill Morneau and Minister of Small Business and Tourism Bardish Chagger today announced the next steps in the Government’s plan to move forward on changes to the tax system that will ensure that Canadian-controlled private corporation (CCPC) status is not used to reduce personal income tax obligations for high-income earners rather than supporting small businesses.
Minister Morneau announced that as the Government moves forward with corporate tax changes, including targeted measures on passive investments, it will ensure incentives are maintained so venture capital and angel investors can continue to invest in the next generation of Canadian innovation.
The Government will work with the venture capital and angel investment sectors to identify how this can be best achieved. With this proposal, and the Innovation and Skills Plan announced in Budget 2017, the Government’s objective is to support and enhance Canada’s growing innovation and technology sector.
Based on its consultations on tax planning using private corporations, the Government announced this week its intention to lower the small business tax rate to 10 per cent, effective January 1, 2018, and to nine per cent, effective January 1, 2019. To support this change, the Government also announced its intention to make changes to the tax system that will ensure that private corporation status is not used to reduce personal income tax obligations for high-income earners rather than to support small businesses to invest and grow.
This week, the Government is announcing further steps towards fairness for the middle class that will take into account feedback received from Canadians during the consultation period. The Government’s approach will ensure the measures are focused on a small number of high-income individuals who get the biggest advantage from existing rules.
Since the launch of consultations on July 18, Canadians have engaged in an important discussion on proposed measures to address tax planning using private corporations. Through town halls and roundtables held from Vancouver to St. John’s, Ministers and Members of Parliament heard and carefully considered the views and perspectives of small business owners, farmers, fishers, professionals and experts.
According to the Canadian Venture Capital and Private Equity Association, $3.2 billion in venture capital was invested in 530 innovative companies in 2016. Venture capital is being invested across sectors, including information communications technology, health and life sciences, clean tech and agricultural technologies. The Government is also advancing initiatives to provide direct support for venture capital. Budget 2017 announced that $400 million in new financing would be made available through the new Venture Capital Catalyst Initiative.