VANCOUVER -- Federal Finance Minister Bill Morneau says small business owners in Canada have an unfair advantage that could create two classes of Canadians.

Morneau met with small business owners in Vancouver today as part of his cross-Canada consultations on proposed changes to income-tax rules affecting entrepreneurs.

He says small business owners in Canada pay the lowest income tax of all G7 countries and that encourages businesses to create jobs, but the current tax system isn't sustainable.

Morneau says incentives such as "income sprinkling" unfairly allow business owners to reduce taxes by shifting some of their earnings to family members who don't have to work in the company.

If changes aren't made, Morneau says Canada risks being split into those who get financial advantages and those who don't.

But entrepreneurs say current incentives allow them to take on the risks of opening their own companies and, unlike salaried and public-sector employees, they don't have a guaranteed pension or employment insurance protection.