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CRA audits punish businesses for being too small

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The Canada Revenue Agency (CRA) is auditing campgrounds and self-storage facilities, and in many cases revoking their eligibility for the Small Business Tax Rate (SBTR). These businesses will be paying as much as three times the income tax they should be, and some will not survive.

Because these businesses have very few employees, the CRA is saying that their income is “passive income”, meaning they don’t qualify for the SBTR. Other than the number of employees, these businesses are just like hundreds of thousands of other businesses that benefit from the lower tax rate.

The CRA recently stopped a review of passive income rules that could have addressed this unfair treatment.

Some CFIB members in these industries confirm the CRA has re-assessed their tax bills to the tune of tens, or even hundreds of thousands of dollars, leading some to shut down their businesses.

CFIB has sent an urgent letter to the Minister of National Revenue and the Finance Minister, asking them to reconsider audit rulings that are wreaking havoc on these small businesses, or at least clarify and update the rules.

In the meantime, hundreds of private campgrounds find themselves in limbo just as their season begins.