Madam Speaker, I am pleased to rise today to speak to the issue of tax fairness and our government's efforts to bring greater fairness to Canada's tax system.
At its core, this is about a key commitment our government made during the election campaign, and has worked every day to deliver; that is to build a stronger middle class and help those working hard to join it.
Simply put, our government has always said that when we have an economy that works for the middle class, we have a country that works for everyone. That is why one of our government's first actions was to raise taxes on the wealthiest 1% of Canadians while cutting taxes for the middle class.
Our current proposals have the same objective, which is to make our system fairer for all Canadians and ensure everyone pays their fair share.
In our platform, we had a specific commitment to address the use of corporations to reduce personal income tax obligations for high income earners. Currently, an incorporated professional earning $300,000 can use the private corporation to get tax savings that amount roughly to the average Canadian's earnings for a year.
We understand these tax-planning strategies are legal. However, when we consider that these strategies are not available to all Canadians. it is clear they are not fair.
At present, a single woman with two children aged 12 and 14 and an incorporated business pays a tax rate that is higher than a married woman with two children aged 19 and 20 and an incorporated business bringing in the same revenue. That is not fair.
The changes we are proposing are aimed at eliminating the legal but unfair advantages that allow the wealthy to incorporate to avoid paying taxes on some of their income and to have a lower tax rate than individual taxpayers.
We do not believe that is fair, and most Canadians agree with this.
There is a lot of misinformation out there about these proposals and I would like to take a few minutes to address some of the more notable misstatements I have heard.
To begin, some have said that these proposals are an attack on middle-class small business. That could not be further from the truth. As the Prime Minister has said, as the Minister of Finance has said, and as so many others in this place have said before today, this is absolutely not true.
We know very well just how important small businesses are to our economy. Small businesses employ approximately 8.2 million Canadians, and this represents 70% of the private sector workforce and approximately 30% of GDP.
We are deeply committed to supporting middle-class small businesses so they do thrive and create good, well-paying jobs. We know just how hard these business owners work to provide for their families.
It is worth remembering that two-thirds of businesses in Canada earn less than $73,000 a year. These hard-working, middle-class small businesses are not our focus. We are supporting these businesses in many ways, as they invest, create jobs, and drive growth throughout our economy. For example, Canada's average tax rate for small businesses is the lowest in the G7 and the fourth lowest among the OECD. This allows small businesses to retain more of their earnings to reinvest, supporting growth and job creation.
Other commentators have expressed concern that our proposals are an attack on the family business. This is also not accurate.
Famliy is often crucial to the success of small businesses. I understand that, and so does the government. If a family member is paid for their work in a small business, the changes we are proposing will not affect them. Family members can continue working for the business without any repercussions.
However, we believe that high-income earners should not be allowed to pay dividends to adult family members through the corporation if those family members do not make significant contributions to the business, simply in order to avoid paying their fair share of personal income tax.
This type of tax planning is unfair because it is not available to all Canadians.
Our government understands that many small business owners save money in their businesses for the future, whether for a rainy day, future investments, or eventual retirement. When it comes to the actions that have already been taken, we have no intention of going back in time. Our proposals would only be applied on a go-forward basis. Our intent is that neither existing savings nor investment income from those savings would be affected. We are not going after the nest eggs. What is more, we encourage small business owners to continue using all available tax-sheltered savings plans, such as pension plans, RRSPs, and TFSAs.
Less than 3% of Canadians max out their RRSP, TFSA, or pension plan contributions. We are proposing to eliminate the legal but unfair advantages that allow some individuals to use unlimited tax-sheltered accounts that are beyond the means of most Canadians.
However, someone who saves money in their business with the intention of reinvesting it in the business or in a rainy day fund will be free to keep doing so. The proposed changes will not affect them.
Finally, I want to address the concerns of some doctors, who have raised concerns about their ability to take parental leave. Our proposals are about making the tax system fairer for everyone. All Canadians, employees, and small businesses can continue to benefit from pensions, employment income, and maternity leave, if they choose. However, our government has been clear since our election that we strongly support women entrepreneurs. The Minister of Small Business and Tourism has made it one of her priorities as minister.
We know that of small businesses in Canada, just under 17% are majority owned by women, and that is simply not good enough. That is why we have taken steps to create specific programs that support women entrepreneurs, and when it comes to these proposals, we are committed to ensuring that these changes do not affect women differently from men. Our government is committed to gender equality, and we will work to ensure that these changes support women's ongoing success.
It is worth reminding the House that our proposed changes will continue to protect businesses' ability to incorporate, make investments, save for downturns, and pay family members who work in the business.
They will protect and maintain small businesses' ability to succeed and create jobs, while ensuring that the wealthiest Canadians pay their fair share.
Our government is committed to building a fair tax system in Canada, and we want to get it right. Over the coming weeks, we will continue to listen to Canadians, including small business owners, professionals, and experts, on how to build such a system while avoiding any unintended consequences.
Although consultations have concluded, the work of the government continues, and we will continue to work with small business owners and professionals, like everyone else, to address their concerns.
Over the summer, a lot of misinformation has been spread, and I want to assure members of the House that our Prime Minister and the government are committed to listening to Canadians and getting this right. As the Prime Minister has said, better is always possible, and nowhere is that more needed than in creating a fairer tax tax system for Canadians.
When we have an economy that works for the middle class, we have a country that works for everyone.