Finance Minister Bill Morneau delivered on a promise from Budget 2017 by releasing a consultation paper on the taxation of small business corporations. He is proposing tax changes that would close loopholes often used by wealthy Canadians to reduce their tax burden, part of the Canadian government’s pledge to level the playing field for middle-income earners.

Morneau proposed for ensuring “fairness for the middle class.” Government wants to curtail so-called “income sprinkling,” a tax move that allows business owners, often professionals like doctors and lawyers, to distribute money to family members who earn less, allowing income to be taxed at a lower rate.

“Many of the richest Canadians are unfairly exploiting the tax rules designed to help businesses thrive,” Morneau said in a written statement. The government wants to make sure rules don’t “give unfair tax advantages to certain often high-income individuals.”

Prime Minister Justin Trudeau’s Liberals have long pledged to tighten rules that allow high earners to incorporate in order to reduce their tax rate. There has been an eight-fold increase in the number of corporations in Canada since the 1970s, while the gap between personal tax and business tax rates has grown significantly. As of 2017, there is a 37.2 per cent gap, meaning income derived from a business faces a much lower tax burden.

“As we grow the economy the benefits should not go disproportionately to one subset of Canadians, and that’s what we’re seeing happening and what we’re seeing happening at an increasing pace,” Morneau said

The income sprinkling changes would raise $250 million annually, according to the government. The changes are aimed at privately held domestic corporations and don’t affect public companies in Canada.

This scheme is extensively used. “It becomes economic for a taxpayer in the right situation to do this. It’s sort of, ‘you’re dumb not to,” Wolfson, a former finance department and Statistics Canada official said. “That would be fairly straight forward but will also rock the boat an awful lot,” he said. “I can only infer that there’s been a spirited back-room pushback to all of this stuff.”

Morneau plans to impose a “reasonableness” test so this does not punish legitimate family businesses. That test will determine just how much work a family member actually does at a business, and if they can really lay claim to profits. Approximately 50,000 Canadian families will be affected by this change, Finance Canada estimates.

A business owner earning $220,000 a year can pay up to $35,000 less in taxes by using sprinkling tactics and distributing income to family members. It also cancelled personal income-splitting, and overhauled child benefit payments to direct more funding to low-income families and exclude high-income ones.

“We raised taxes on the wealthiest 1 percent and lowered them for the middle class,” Trudeau said this month in Hamburg, when asked about anti-capitalist protests outside Group of 20 meetings. “Trade has led to growth but it hasn’t automatically distributed its benefits properly. So, yes, people are anxious, and yes, people are angry.”

“This is about people using a corporate structure to shield their income and gain a tax advantage,” Morneau told reporters. Canadians expect the government to curtail people using “fancy accounting schemes” to lower their tax burden, he said. “We want a tax system that is fair,” he said.

The Liberal government wants to maintain the progressive tax system that demands wealthy Canadians pay more because they can afford it, he said.