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Carbon rebate could bode well for businesses: advocate

Small businesses are pleased to see the carbon rebate being rolled out but are nervous about the repercussions of the capital gains tax changes

Author: Sandi Krasowski

THUNDER BAY– Peter Bethlenfalvy, Ontario's minister of finance, called the proposed 2024 federal budget released last week a "missed opportunity to scrap the costly federal carbon tax" and says his government will continue to urge the federal government to eliminate the carbon tax once and for all.

The planned budget includes the return fuel charge proceeds from 2019-20 through 2023-24 through a new refundable tax credit to upwards of 600,000 businesses with 499 or fewer employees. The federal government says this would inject $2.5 billion into small- and medium-sized businesses.

Charla Robinson, president of the Thunder Bay Chamber of Commerce, said they are pleased to see the carbon rebate for small businesses being rolled out.

"Anything that is returned to small business to put more resources into their company so that they can be successful is a good thing," she said. "We are waiting for more details on exactly how that rebate is going to be calculated and figuring out what that means for local business."

Robinson said it all depends on how they calculate it and, so far, it appears the calculation is going to be based on how many employees the business has.

"Does that mean full-time employees only, part-time employees only, or a combination and how much per employee it is? It is really hard to understand what that means until we have the specific details," she said.

Capital gains causing some nervousness

For capital gains that exceed $250,000 in a year, the new budget proposes the reduction of the tax-exempt amount to one-third for individuals, from the current half.

But this applies to all of a business's capital gains, not just those over $250,000 in a year.

Robinson called capital gains taxation a "very complex system" and has received concerns as to how this will be applied.

"There will be an individual calculation that is different than how capital gains are impacted for corporations and trusts," she said.

"Then there's also the Canadian entrepreneur incentive, which will also change capital gains exemptions for small business owners, and there's a list of eligible sectors. It's very complicated and hard to understand exactly how this will directly impact small business owners and I think it's important to know that not all small businesses are registered the same."

She explained that a small restaurant that is operating as a non-incorporated small business with a personal or partnership tax structure, may have another restaurant beside them that is the same size but is incorporated.

"The tax rules are different and what I think is the most important thing for people to understand is that when you're a business owner, your business is your pension and you don't have the Canadian Pension Plan (CPP)," she said. "Employers are helping to contribute to the pension collection for (their workers). When you own a business, your business is your pension. You keep investing your money back into that business to help it grow with the thought that when you want to retire, you're going to sell the business and that's your pension fund. "

Robinson added, if that's someone's plan, these capital gains rules have a very big impact on what their pension is going to look like and what their retirement income is going to look like.

"So there's certainly some nervousness and some concern that I'm hearing from small business owners and being taxed on 66 per cent of that is a pretty big amount to be taxed on compared to if you have a pension plan that you're withdrawing pension funds from, you're not taxed at the same level," she said.

"Those details still need to be figured out. That'll be something that we'll be working with local accountants to try to help our businesses to understand, what it means for them and how this could change their business planning."

Sandi Krasowski is a Local Journalism Initiative reporter with The Chronicle-Journal in Thunder Bay, Ontario. Title image: Composite 2024 Budget and photo by Jennifer Latuperisa-Andresen on Unsplash.

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