P.E.I.'s Liberal premier calls on Ottawa to delay implementing tax changes

CHARLOTTETOWN -- The Liberal premier of P.E.I. is calling on the Trudeau government to hold off implementing its proposed tax changes, saying they are causing "significant concern and uncertainty."

Wade MacLauchlan issued a statement Thursday saying many business owners on the Island have told him they are concerned the proposed changes to corporate tax laws could impede succession planning, particularly in the agriculture and fishing sectors.

The premier has sent a letter to federal Finance Minister Bill Morneau to ask for an extension to public consultations.

MacLauchlan said the Island has been experiencing strong economic growth, which he attributed to the entrepreneurial spirit and risk-taking of small- and medium-sized business leaders.

"For these economic leaders to remain confident and continue to invest and drive growth, they need to clearly understand the tax regime in which they will operate," the premier said. "Any confusion or unintended consequences of the changes will have a significant dampening effect on future growth of our economy."

Morneau has said the changes are meant to end tax advantages that some wealthy business owners have unfairly exploited and to ensure all Canadians have a level playing field. However, his proposal has drawn complaints from doctors, lawyers, tax planners and other small business owners who have used incorporation to reduce their income tax burden.

MacLauchlan said he has heard similar complaints.

"While proposed changes to tax systems always promote debate and discussion, my government has received a substantial number of enquiries from business owners who remain unsure as to the scope and impact of the proposed changes," MacLauchlan said.

Several other premiers, Liberal and otherwise, have voiced similar concerns, including Nova Scotia's Stephen McNeil, who said he was concerned about the impact the tax changes could have on health-care recruitment.

McNeil has said the status quo allows doctors to plan for their retirement and is also an important tool for small business owners that allows them to reinvest in their businesses or to weather a change in the economy. Before he entered politics, McNeil previously ran an appliance repair shop.

Morneau released the three-part tax plan in mid-July. The government launched a 75-day public consultation period, which ends Oct. 2. Morneau has said he's open to making changes, if necessary.

The tax proposals include restrictions on the ability of business owners to reduce their tax rate by sprinkling their income to family members in lower tax brackets, even if those family members do not contribute to the company.

Morneau also proposed limits on the use of private corporations to make passive investments that are unrelated to the company. Another change would limit business owners' ability to convert regular income of a corporation into capital gains, which are typically taxed at a lower rate.

Morneau has said there is a lot of misinformation circulating about the impacts of the proposals, and Ottawa has been trying to bring clarity to the debate.