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We all engage in some form of tax planning. RRSP contributions are tax expenditures. Every deduction that is allowed is a tax expenditure. If the government wants to change these, it can do so. But to do so is a fundamental change to the after-tax income of the taxpayer — that is, the money that is left to pay rent and buy groceries.

The political assumption in Morneau’s latest announced changes is that the general population will not feel sorry for lawyers, doctors or accountants who are said to “abuse” the tax system. However, if the tax system for small business is fundamentally changed, someone will pay. And the government may not like how that payment plays out in the economy.

For instance, some capital and much income will be driven offshore, where the Canadian government will lose revenue. Some taxpayers will physically move to jurisdictions where the tax rates are lower (or are projected to be lower) than what they are in Canada.

Mickey Cohen, a former deputy minister of Finance, had a rule: “Don’t make the tax system so tight that we can’t see the players playing. When things get bad enough, we’ll screw down the system.”

Each tax system has some “loopholes” that everyone knows are there. They get built into the system. The current system provides for many benefits to well-planning taxpayers. For example, it is wholly legal to “freeze” one’s estate so that future growth accrues to children and grandchildren. All at a cost to taxpayers at large. Is this the next “loophole” to be fixed?

After feedback, the minister has previously backed away from changes to small business taxation. I hope that will happen again.

Bernard Shinder, QC, is an Ottawa lawyer and consultant. He was senior adviser to the deputy minister of Finance, 1980-1984. He also headed a group tasked with revising small business taxation in Canada.