September 3, 2020- Canada Revenue Agency’s (CRA) interpretation as campgrounds being a “specified investment business” and not an “active” business is putting hundreds of our Canadian Private Campground’s future in jeopardy. A specified investment business is described in the Income Tax Act as a business with the principal purpose of deriving income from property, including interest, dividends, rents, or royalties and has a Corporate Tax rate of around 50%. However, income from a “specified investment business” is only eligible for the Small Business Deduction if the corporation employs five or more full-time employees all year. The Small Business Tax Deduction allows a corporation to pay about 15% Corporate Tax which is fair and normal for all small sized Canadian businesses.
The majority of campgrounds do not employ five full-time employees which CRA has used as the minimum threshold for an “active business”. Most campgrounds are required to close during the winter months in order to comply with local zoning by-laws. Therefore being a seasonal business, our mostly small family run campgrounds employ most of their employees only 6 months of the year as it is simply not financially feasible or necessary to employ extra staff year-round.
As you can agree, no business especially seasonal campgrounds are financially capable of paying a 300% increase in Corporate Tax and this potential interpretation change by CRA could ultimately impact up to nearly 75% of our 2347 private campgrounds. This will unquestionably have a significant ripple effect on all RVers and Campers who will find it increasingly difficult to find available campsites during the camping season.
In 2018, the House of Commons Finance Committee recommended to the Minister of Finance, Bill Morneau, to include a change in the 2019 budget to have campgrounds eligible for the small business tax deduction rate however the committees recommendation was ignored by the Minister.
If not resolved, the potentially unfair tax situation will harm the entire RV and campground industry ultimately leading to: reduced number of campgrounds available for Domestic and International Tourism, loss of jobs, substantial loss of tax income, and diminished economic benefits in small communities across the country.
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