Finance Minister Bill Morneau rises during question period in the House of Commons in Ottawa on Sept. 28, 2017.Adrian Wyld/The Canadian Press
Canadians are sharply divided over the federal Liberals' controversial proposed changes to small-business tax rules, according to a new Nanos survey for The Globe and Mail.
The issue is expected to be a main point of contention this week when Prime Minister Justin Trudeau plays host to provincial and territorial premiers on Tuesday.
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The government's formal consultations officially close Monday on a package of proposals that has generated heated reaction from small-business owners. Finance Minister Bill Morneau has been touring the country, facing packed rooms of angry business owners urging him to abandon the proposals.
When asked if the proposed changes are a step in the right or wrong direction, 37 per cent of survey respondents supported them, 35 per cent were opposed and the rest said they were unsure.
"This is a very divisive issue for Canadians," said pollster Nik Nanos. Only 13 per cent of those surveyed said they would be personally affected by the changes. Those who say they are directly or indirectly affected through a friend or family member are far more likely to oppose the governments changes than those who say they will not be affected.
Mr. Morneau's message in recent days has been that the proposed changes will only affect a relatively small number of very high-income Canadians. He has said that many Canadians who think they will be affected likely won't be. However, the government has not released firm estimates as to how many Canadians are expected to be touched by the proposals.
The issue has dominated the federal political agenda since Parliament resumed in September, and the debate is garnering the attention of Canadians.
A strong majority of 77 per cent said they were either aware (42 per cent) or somewhat aware (35 per cent) of the plan.
At a news conference in July, Mr. Morneau released a complex set of proposals, including two pieces of draft legislation. The proposals would restrict the ability of a business owner to split – or "sprinkle" – income via dividends to family members who are not directly involved in the business. A second draft bill would restrict the conversion of dividend income into lower-taxed capital gains. A third proposal, that is less advanced, would discourage the use of an incorporated small business as a vehicle for making passive investments that are unrelated to the business.
The passive-investment proposals included several options and were released in the form of a discussion paper. Mr. Morneau has said draft legislation on that aspect will be released at a later date.
The Nanos survey asked Canadians for their views on the income-splitting and passive- income proposals.
A majority (56 per cent), disagreed with allowing owners of a small corporation to split income to reduce taxes paid, with 32 per cent saying they were opposed and 24 per cent saying they were somewhat opposed. In contrast, 21 per cent said they support the idea, 20 per cent said they somewhat support it and 4 per cent said they were unsure.
On the passive-investment issue, respondents were asked whether small-business owners should be allowed to use their private corporation to make investments and earn income that is unrelated to their business, such as stock in other companies. Nearly half (48 per cent) said they should be allowed, while 37 per cent said they should not. A further 15 per cent said they were unsure.
Mr. Nanos said the results suggest the government may have enough public support to move ahead with the income-sprinkling restrictions, but may want to reconsider its passive-investment plans.
"I think, for a lot of Canadians, when they think of income splitting, they see something that is done in order to minimize someone's tax burden," he said. "While allowing small businesses the flexibility to earn income unrelated to their business is just part of being a business person."
The hybrid phone and online survey of 1,000 Canadian adults was conducted between Sept. 23 and 26 as part of an omnibus survey. The margin of error for a random survey of 1,000 Canadians is plus or minus 3.1 percentage points, 19 times out of 20.
Separate polling of political-party support by Nanos has found that the gap between the Liberals and the Conservatives has narrowed. Support for the Liberals is at 38.5 per cent, followed by the Conservatives at 32.5 per cent and the NDP at 14.6 per cent.
"We've been seeing negative pressure on the Liberal numbers over the last number of weeks where their 10-to-12-point margin has kind of narrowed to six points," he said. "I think this [tax issue] is part of the mix for sure."
Bill Curry