The majority of small business families don’t see the benefit of income sprinkling, according to a new report from the Canadian Centre for Policy Alternatives.
“Our estimates show that only [five] per cent of families receiving small business dividends are actively using income splitting — which means only 0.3 per cent of all Canadian families are impacted,” the report’s author, CCPA Senior Economist David Macdonald, said in a release Tuesday.
Income-splitting, which is when business owners reduce their tax rate by “sprinkling” their income to family members in lower tax brackets, is one of the loopholes Ottawa is trying to close with its proposed tax reforms for private corporations.
“Closing the income-splitting loophole will have almost no impact on small business families, much less Canadian families in general,” Macdonald said.
The report found the wealthiest 10 per cent of families reap 64 per cent of the benefits of small business income sprinkling, while only three per cent of middle-class families see gains, and 87 per cent of families see no benefit at all.
The report also found families headed by a man were far more likely to benefit from income sprinkling than families headed by women.