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The corollary of this is that anyone thinking about buying an existing business in Canada from the countless Baby Boomer entrepreneurs who see the value of their business as their nest egg will now have to think twice, reducing the value of all of those businesses across the board.

Second, the Liberals are missing a critical piece in the “tax passive investments to avoid sheltering and achieve real-time integration” approach: Passive investments are passive to the investor, but are anything but passive to those in whom the investments are made.

Entrepreneurs — especially those with significant retained earnings — tend to invest in other entrepreneurs, since it’s what they know. Tens of billions of dollars are invested each year in business start-ups and growth through a variety of debt and equity instruments in businesses often starving for the growth capital they require.

Taxing these passive investments at 71 per cent will — and of this I am certain — significantly reduce any incentive to take investment risks with retained earnings, dramatically affecting capital formation by active companies and, again, reducing the overall taxes collected on those monies when measured in dollars instead of percentage points.

Third, and perhaps most importantly, the draconian measures proposed will create not only a disincentive to take risk in the first place, but a strong incentive to study and adopt complex structures to take fortunes offshore, resulting in the type of conundrum now faced by American legislators — how to change the tax code to stop taxpayers from paying their taxes outside of the country to avoid outrageous tax rates for business.