Sure. The CRA's testimony referred to or considered that some personal services corporations were taking advantage of tax loopholes and that the federal small business tax rate was actually using the 11% versus what a normal tax rate would be, namely 19%. So there were also discussions of individuals realizing some unfair tax advantages. Basically, we believe that it was a little bit misleading.
An independent consultant can take money out of a corporation in two ways. One is obviously as a salaried person and the tax rate would be exactly as it would be for full-time individuals. The second way is through retained earnings and paid in dividends. In this case, dividends are taxed at a provincial rate--and I only have Ontario's at 31.5%. So we believe that any changes in the ability for an independent consultant to utilize the retained earnings and dividend option would be detrimental for the long term.
This has arisen out of the fact that in the greater Toronto area there have been about 12 longstanding independent consultants being recently audited. It's sending a ripple through the community. It is our hope now that moving forward the government will actually realize this type of employee engagement rather than always having to wonder whether the CRA is going to go back and actually deem them actually as an employee versus an independent consultant and a small business corporation. We really just want that whole avenue legitimized and moving forward.
I'm not the person to solve that and what that should look like, but I think the whole risk and uncertainty is what is sending ripples through the community.
To give you an example of why this is becoming a bit of an unsure thing, legislation in the U.S. created a shift in the U.S. from contracted services to employee-like arrangements, largely driven by large companies. There was a fundamental shift in contracting. Basically, services to corporations went up, and cost of services went up to corporations and government. As a result, there was more burden in administrative costs and the actual salaries to contractors declined. I think that's created some fear north of the border that something similar might be in the works and is being discussed based on the audit.