Big problems with Bill Morneau’s retooled business tax plan

If Bill Morneau wants a happy holiday, he had better hope Santa isn’t an incorporated small-business professional. There would be more than coal in the stocking.

Annus horribilis is ending for the finance minister none too soon.

His small-business tax scheme is the political gift that keeps on giving: a summer surprise crop that reaped an autumn harvest of antagonism and a winter of fallow discontent in the land.

The proposal was class warfare disguised as a virtuous path to equity. Someone in some professional capacity somewhere in this country planted the idea that the proposal was about “fairness” and “closing loopholes” and “paying one’s share.” Canadians overwhelmingly thought otherwise.

Of all the efforts in Canada 150, it seems this initiative did more to unify the country than anything the Liberals might have concocted. Only, of course, in the wrong way.

While some of the plan has been walked, crawled, even begged back, the episode initially revealed in Morneau a curious incapacity to practise what he preached. For it was clear the minister’s own handling of his holdings did not bear the scrutiny he would now impose on others – that he was a poster boy for what he was criticizing.

When he at first resisted, then relented, in divesting shares and donating proceeds of his family’s company, he went from warrior to wounded.

There is something unseemly about year-end political gestures to close chapters on controversies. It has a let’s-get-this-done-and-hope-people-calm-down tenor to it. Site C comes to mind closer to home, but Morneau last week also tried to prune the unsightly tree blocking sunny ways in the garden.

He clarified the Canadian definition of sprinkling in this garden, as in income sprinkling to loved ones who earn dividends when they contribute work to one’s business.

The technical guidelines outline how the government will assess one’s claims – so, in truth, he defined what government considers reasonable.

Run for the hills.

Even then, though, he somehow suggested Canadians will have a lot of time to figure this out because the rules will kick in only when taxes are filed in 2019. Uh, not really. The regime kicks in January 1, which is when you’d better have Plan A and Plans B through Z.

Quite correctly, the opposition parties believe this is a bit like dropping a box off the back of a truck and speeding off. It was a near-final word and meant no further House of Commons discussion.

But that’s only one of two houses in Parliament, and a committee of the sober second chamber last week preceded Morneau by two hours in producing a report and pronouncing the need for a deep breath in the anxious context of change.

The committee recommended a do-over; failing that, a do-later.

And this is where it looms sticky, for our history is wrought with battles of the two chambers and, as we are experiencing now, battles even within those chambers.

In this instance, the Conservative senators, mostly appointed by Stephen Harper, are at odds with some of the Liberals appointed by Jean Chrétien and Paul Martin and some of the Independents (mostly Liberals) appointed by Trudeau.

The Tory-dominated finance committee report suggests that the upper chamber will be in no mood to receive a budget from Morneau that rubs any salt into the small-business wound. While it is not necessarily advisable, we may be headed for a new showdown, largely aimed at boosting the 2019 Conservative electoral chances.

The committee heard coast-to-coast criticism of Morneau’s meddling. It wants a royal commission – and that’s a really deep breath – on taxation akin to the exercise a half-century ago under Kenneth Carter. The Liberals and their Independent brethren, one can be assured, want nothing of the sort.

They have to find definite revenue now, given there are indefinite deficits later.

For Morneau and Justin Trudeau, these holidays will be respites all too short in a year all too long.

Kirk LaPointe is editor-in-chief of Business in Vancouver Media Group and vice-president of Glacier Media.

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