When they meet in Ottawa today, provincial finance ministers plan to ask their federal counterpart Bill Morneau for permission to opt out of a controversial tax change.
The country's finance ministers are gathered in Ottawa Tuesday to discuss issues such as the state of the economy, federal equalization payments and U.S. trade protectionism. But Manitoba's Cameron Friesen and Saskatchewan's Donna Harpauer say they will also push Minister Morneau about a tax change to passive investment income held by incorporated individuals.
Ministers Friesen and Harpauer say Ottawa has told each province that they must choose whether to implement the tax change — and they want to know how complicated it would be if they ultimately decide not to follow Ottawa's lead.
The federal government has argued the tax change on passive investment income will affect only the top 3% of the wealthiest incorporated individuals — but critics have warned it will unfairly pile on significant costs for small business owners. And Minister Morneau has been clear that the provinces can choose whether they want to be integrated with Ottawa on the tax change.
But the issue and how to go about opting out is very complex. The passive-income tax change will require the provinces to make legislative changes of their own in order for them to follow suit with Ottawa. The change, which will take effect in 2019, is projected to add $2.3 billion to federal coffers over five years, but Ottawa has insisted the effort was not about generating more revenue. Minister Morneau's office has maintained it is about ensuring wealthy individuals do not have an incentive to incorporate, just so they can get a better tax rate than people in the middle class.
