Considering those two issues, in the first issue around the differences in the tax situation of people with incorporated vehicles versus others, there are some important differences that are there because we are trying to encourage people to start small businesses. The idea that we have the lowest tax rate among G7 countries for small businesses—on average, 14.4% in this country—is an important incentive for people to start a business and take those profits and reinvest them in their business.
The fact that we have a lifetime capital gains exemption for small businesses—a lifetime capital gains exemption that's grown significantly to $835,000—is an important incentive for people to invest in their businesses. There are differences between people who are getting a salary—or people who are unincorporated—and people who are in business. Some of those advantages make really good economic sense. We're trying to encourage behaviour that we know will grow the economy.
But there are some advantages that don't actually, necessarily, encourage the kind of opportunity we want. We don't see as a benefit the idea that people can sprinkle income to adult family members who are not involved in the business just to lower their tax rate. We think other Canadians who don't have that advantage would not see that as one that is actually adding value to our economy. Going forward we're looking at whether that should be continued.
We see that the ability for people not only to have a low tax rate to actively invest in their business but also to create a retirement account inside their business means there's an advantage that isn't really about growing the business. It's about growing a retirement account. Now, I understand that for small businesses that vehicle sometimes makes sense, because sometimes people need the access to those funds on a fairly short time period. We understand that. That's something we've heard from small business and something we're listening to closely.
But for people who are building up a big retirement account just for that exclusive purpose.... We know that, up to about 150,000 dollars' worth of income, it really isn't an advantage for those people, because they can instead use the RRSP and the tax-free savings account vehicles. It's only an advantage for the people who have significantly more income. That's critically important for us to understand.
With respect to the differences between private and publicly traded companies, my experience being in both a private and a publicly traded corporation as a CEO is that what most businesses do when they earn profits is they reinvest them in their business to grow their business, and that's what we want.
When most businesses finish with their reinvesting in the business, they dividend that money out or give it out in salaries. If they are a small business, they pass it out. If they are a bigger business, they dividend it out. Sometimes businesses will decide to leave some money on their balance sheet for reinvestment in the business that isn't the next year. In that case—of course—they're not really doing it for the investment income. They're doing it to invest in their business. The goal they have, then, is to keep that money in their business so that they have a future opportunity.
We're trying to make sure those objectives continue to be possible—invest in your business at a low tax rate, keep money in the business for what's necessary—and also find a way for people to invest in their retirement that creates some sort of inherent fairness in that retirement system, whether they be in a small business, a medium-sized business, or a large business.
We believe all these objectives can be met. We know we'll need to listen to people—we are listening to people—to make sure we get it right. I'm encouraged that so many people are coming forward with ideas on how we can do exactly that.
We'll have much more to say as we finish the consultations and consider the input and how best to get to our objective: a fair tax system that encourages investment.