A new coalition of small business leaders is banding together to protest Finance Minister Bill Morneau's three-pronged plan to clamp down on tax rules for private corporations.

The Coalition for Small Business Tax Fairness published a public letter to Morneau on Thursday, calling on him to reconsider the clampdown.

"After a careful review of these complicated changes, we strongly believe they will have very negative impacts on the ability of independent businesses, including professionals and farm families, to survive in challenging times," the letter reads.

The coalition of 35 organizations representing hundreds of thousands of businesses and individuals – including groups such as the Canadian Medical Association and the Canadian Federation of Agriculture — is adding its voice to a chorus of opposition in the wake of the tax plan.

The Finance department announced its strategy to tighten up tax rules applying to private corporations on July 18.


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    One proposed change would restrict the ability of business owners to lower their tax rate by sprinkling income to family members in lower tax brackets. Another would limit the use of private corporations to make passive investments in things like stocks or real estate.

    A third would limit the ability to convert a corporation's regular income into capital gains, which are typically taxed at a lower rate.

    "Many of the richest Canadians are unfairly exploiting the tax rules designed to help businesses thrive," Morneau said at the time. "These tax advantages are in place to help these businesses reinvest and grow ... We want to make sure those rules are used to do just that, and not to give unfair tax advantages to certain – often high-income – individuals."

    The government established a 75-day consultation period for input. In the interim, there's been a mounting uproar from the public. 

    "In ten years at the Canadian Chamber, I've never seen an issue that has generated greater concern among our members," Canadian Chamber of Commerce CEO Perrin Beatty said in a statement Thursday. "It's a stealth attack on farmers and small businesses."

    The new coalition warned the government's plan will add another layer of complexity to the Income Tax Act, and said the proposal is just another issue to contend with amid new carbon and wage rules across provinces.

    All in, it’s calling on Morneau to take his proposals "off the table", and "launch meaningful consultations."

    "Our members, including many professionals, feel unfairly targeted, intentionally or not, by the changes and painted as 'tax cheats' by the federal government simply for accessing tax planning tools that they have been encouraged to use for decades," the letter reads.

    A finance department spokesperson was not immediately available for comment on the coalition’s letter. 

    A finance department spokesperson gave no indication on Thursday that Morneau is prepared to take his plan off the table.

    “It’s important to make sure we have a tax system that respects the principles of tax fairness and neutrality by addressing gaps and structural weakness in our system to ensure that Canadians all play on a level playing field,” Dan Lauzon told BNN via email. “These changes matter, and we welcome the public debate.”  

    -- With files from the Canadian Press 


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