Technical Committee on Business Taxation
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1996-09

Compliance Issues: Small Business and the Corporate Income Tax System

Plamondon & Associates Inc.

The Adobe Acrobat Version - (82,106 bytes) contains the full text of the report. It can be viewed on-line or downloaded.

Abstract

The corporate income tax system is functioning reasonably well for small business in Canada, with no dramatic flaws or overwhelming irritants. While there is room for improvement, this is the overall conclusion of this report to the Technical Committee on Business Taxation. The report focusses on the nature and extent of incremental compliance costs, specific irritants in the system, and revenue-neutral initiatives that the government could undertake to improve and simplify the system for Canada's entrepreneurs. The data in the report was generated primarily from a discussion panel of six accountants who deal exclusively with small business. Given the absence of any field work with individual small businesses, the representations and opinions should not be viewed as definitive. While noting that the incremental compliance costs for completing a basic corporate tax return for most small-businesses is between $200 to $500, the panel recommended: a short-form corporate tax return to promote an understanding of the system; a simpler and fairer system for capital assets; elimination of separate provincial corporate tax administrations; less frequent tax installments; a less costly method of dealing with inactive corporations; more certainty and fewer changes in the system; and, greater consultation with individual small businesses concerning compliance costs and the functioning of the system. The panel also observed: the proper functioning of the Small Business Deduction; tax planning that focusses on income splitting and reorganization of share capital; clearly legitimate claims for R&D credits not being made; the use of estimating techniques to comply with non or partial deductibility of expenditures; the complexity of provisions concerning company vehicles; and, the high level of professionalism and level of assistance given to small business by Revenue Canada.

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