Proposed corporation rules could be taxing for dozens of MPs

Dozens of members of Parliament could end up paying higher taxes as a result of Finance Minister Bill Morneau's move to tighten the tax rules for private corporations.

A study by CBC News of ethics reports filed by Canada's MPs reveals that nearly one-third of Prime Minister Justin Trudeau's cabinet including Trudeau himself own or have recently owned private corporations. Overall, one in four MPs, or 26 per cent of the House of Commons, own or have a significant interest in one or more private corporations,from farms and restaurants to holding companies with investment portfolios.

The highest rate of private corporation ownership was in the Conservative Party at 30.6 per cent, followed closely by the Liberal caucus where 30.2 per cent of MPs reported owning a corporation.

In the New Democratic Party caucus, however, only one of 44 MPs lawyer Murray Rankin reported owning a private corporation.

• Why Morneau wants to tighten rules on private companies

The study found 20 per cent of the Bloc Qubecois caucus had a private corporation while Green Party Leader Elizabeth May did not report having any.

While in some cases MPs listed their corporations as inactive, they still exist and could be reactivated at any time.

Morneau left accountants and tax lawyers across the country scrambling last week when he announced plans to tighten some of the rules around the use of private corporations, saying some Canadians have been getting a legal, but unfair, tax advantage.

While Morneau portrayed the move as something that will only affect very wealthy Canadians, tax experts say the proposals will also affect a wide range of small businesses, professionals and family farms.

89 MPs have or had corporations

It is not known just how many of the 89 MPs who own or who have recently owned private corporations have been using some of the measures Morneau has targeted, such as "sprinkling" income among other family members.

However, in many cases MPs reported the corporations were co-owned with their spouses, with the MP and their spouse both reporting dividend or employment income from the company an indicator that they may be "sprinkling."

Many appear to use their companies to hold the kinds of passive investment Morneau is also targeting.

While the steps Morneau is proposing risk costing a number of members of Parliament, including himself, more tax,Morneau's office is unfazed.

"As is the case with tens of thousands of Canadians, there are many MPs (from all parties) who have registered corporations," said Dan Lauzon, spokesperson for Morneau.

"Under the new rules these individuals, and any other high-income Canadian who could be affected by the changes, may pay more taxes.We think that's right, and we think that's fair."

Members of Parliament earn $172,700 a year and cabinet ministers get an additional $82,600 to bring them to $255,300 a year.

Trudeau'sprivate corporations

Trudeau's own ethics filing reveals that private corporations play a significant role in his family's financial affairs.

Trudeau owns 7664699 Canada Inc., which he has put in a blind trust during his time as prime minister but which has also been paying him dividends. His brother Alexandre also has a private corporation, 7664737 Canada Inc.

The companies are the primary and secondary shareholders in a third private corporation, 176078 Canada Inc., set up in 1995 to hold the assets of their father, former primeminister Pierre Trudeau.

Justin Trudeau is also the joint owner with his brother of 9190-0563 Quebec Inc., set up in 2007. The company, which lists its activities as real estate development and the production and sale of firewood, owns a property with a chalet, which once belonged to their father, in the Laurentians community of Saint-Adolphe-d'Howard north of Montreal.

Cameron Ahmad, spokesperson for the prime minister, said that while Trudeau has private companies, he has not taken advantage of the tax strategies Morneau is trying to restrict.

Morneau, however, admitted to reporters the day of the announcement that he has used a private corporation to hold income although he said he has not used it to sprinkle income amongfamily members or convert income to capital gains.

Morneau is the sole owner of 2070689 Ontario Ltd., a holding company, and joint owner with four siblings of five other real estate holding companies. His wife, Nancy McCain is sole owner of NCM Holdings, and Morneau is a beneficiary of the Nancy McCain 2013 Family Trust.

While Morneau said he hasn't studied the impact, he conceded,"My expectation is that these changes over the long term will mean I'll end up paying more tax."

Some ministers aren't talking

Other ministers, however, refused to say whether their private corporations have taken advantage of any of the three tax savings measures being targeted.

Justice Minister Jody Wilson-Raybould listed a "significant interest" in 567749 B.C. Ltd., a management consulting company called KaLoNa Group. Her husband, Tim Raybould, is listed as president, with a controlling interest.

Spokesperson David Taylor said the company was incorporated by Raybould two decades ago, but he refused to reveal whether it could be affected by Morneau's move.

"It wouldn't be appropriate for me to release or comment on anyone's private finances beyond what is already a high bar for transparency."

The response was nearly identical from Kevin Lavigne, spokesperson for Fisheries and Oceans Minister Dominic LeBlanc.

Lavigne said the Dominic LeBlanc Professional Corporation was set up when he was practising as a lawyer. While it still exists, it is inactive. LeBlanc's wife has her own holding company, J. Richard P.C. Inc.

International Development Minister Marie-Claude Bibeau co-owns 2753-2399 Quebec Inc., which runs Le Camping de Compton.

Three cabinet ministers, including Health Minister Jane Philpott, Heritage Minister Mlanie Joly and Immigration, Refugees and Citizenship Minister Ahmed Hussen, had private corporations that were dissolved or wound up shortly after the 2015 federal election.

Agriculture Minister Lawrence MacAulay has a private investment company that he listed as currently not operating. Lawrence A. MacAulay Inc. was created in 1984, four years before he was first elected. His wife is listed as having a "nominal interest."

PEI percentage is highest

In fact, the highest percentage of private corporation ownership among MPs per province was in MacAulay's home province of Prince Edward Island, where three of four MPs, or 75 per cent, owned one. The next highest levels were in New Brunswick with six out of 10 MPs, 60 per cent,and Nova Scotia with four of 11 MPs, 36.3per cent.

Ontario, which had the highest number of MPs with private corporations, 35, came fourth with 28.9 per cent, followed by Manitoba at 28.6 per cent.

Newfoundland, where Liberal Seamus O'Regan was the only MP with a private corporation, had the lowest percentage of private corporation ownership by MPs at 14.3 per cent followed byAlberta at 20 per cent and Quebec at 19.2 per cent.

Elizabeth Thompson can be reached at elizabeth.thompson@cbc.ca

One in four members of Parliament own or have recently owned private corporations. Here's the list.