OTTAWA — The Liberal government will go ahead with controversial tax reforms despite clear new evidence the economy is rebounding, Prime Minister Justin Trudeau said Tuesday.
The Finance Department says the federal government ran a smaller deficit than the $23 billion that was forecast in the spring budget, ending the 2016-17 fiscal year with an actual deficit of $17.8 billion.
Not surprisingly, Trudeau called the news a clear sign that the Liberal plan to grow the economy through helping the middle class is working.
Still, the prime minister stood firmly by his government's controversial plan to eliminate tax provisions used by a growing number of small businesses, arguing it is part of the Liberal commitment to increase fairness.
"We are moving forward to make the tax system fairer to stop the system that encourages wealthy Canadians to use private corporations to pay lower tax rates than the middle class," Trudeau told a news conference in Ottawa.
The proposed changes have sparked a revolt by doctors, farmers, small business owners and even some backbench Liberal MPs, who have spoken publicly about the complaints they have been hearing from their constituents.
Finance Minister Bill Morneau released the controversial, three-pronged plan in mid-July, including restrictions on the ability of business owners to lower their tax rate by sprinkling income to family members in lower tax brackets, even if those family members do no work for the business.
He also proposed limiting tech use of private corporations to make passive investments in things like stocks or real estate and limiting the ability to convert the regular income of a corporation into capital gains, which are typically taxed at a lower rate.
Trudeau said he will take the feedback into account to make sure the proposed changes target the wealthy, but said he will move ahead.
"How exactly we move forward, what measures are in the legislation going forward is directly impacted and affected by the questions people ask, the concerns brought up," he said.
"We were pleased to see a tremendous amount of response to our consultation paper — people with concerns, some legitimate, some less so — and we are folding them into the proposal that we will put forward, which will make our tax system fairer."
Trudeau also suggested the promised legislation would be narrowly targeted.
"We will ensure that we're doing it the right way, so that hard-working, middle-class small businesses, hard-working, middle-class farmers, do not get penalized that is aimed at wealthy Canadians."