The federal government is giving the Canadian grain industry another two months to voice their opinions on deferred cash grain tickets.
On May 23, the federal finance department issued a statement confirming that the public consultation period on deferred cash purchase tickets for grain would be extended to July 24, 2017.
The initial deadline had been set for May 24.
Deferred cash purchase tickets are a popular tool used by prairie farmers to manage cash flow and taxable income.
When a farmer delivers grain to a licensed elevator, he can arrange to receive a cash purchase ticket in lieu of immediate payment.
The cash purchase ticket allows the farmer to defer income to the following taxation year.
In its most recent federal budget unveiled in March, Ottawa signaled its intention to review the use of cash purchase tickets.
“The government remains committed to building a fair tax system that benefits the middle class and those working hard to join it,” said the finance department’s May 23 statement.
“This includes recognizing that, over time, changes in the economy have made a number of provisions in Canada’s tax statutes less relevant than when they were first introduced.
“It is for this reason that … (we) launched a consultation on the ongoing utility, and potential elimination, of the income tax deferral available in respect of cash purchase tickets for deliveries of listed grains.”
According to Ottawa, the use of deferred cash purchase tickets for grain is a “departure from the general rule with respect to taxpayers … who are required to include the amount of a security or other evidence of indebtedness received as payment of a currently-payable debt in income in the year in which it is received.”
For farmers, however, the tickets are a widely used tool that allows them to defer income and manage their tax burden.
Alberta farmer Kevin Auch said the elimination of cash purchase tickets could potentially cause some farmers to defer grain sales rather than selling grain during market rallies.
“Many farmers use this tool to avoid having to choose between losing a sale that might bump them into a higher tax bracket that year or lose the ability to maximize their revenue due to severe tax implications,” Auch told the Western Producer when Ottawa launched the consultation.
“For many farmers, eliminating this tool also eliminates the option to sell grain when there is a good price for it,” he added.
“Grain would end up sitting in storage on-farm rather than being sold into the marketplace. This disruption in cash flow is not only a loss to farmers but to the entire value chain.”
Officials from the federal finance department were not immediately available for comment when contacted by the Western Producer on May 24.
Stakeholders are invited to provide comments on the ongoing utility, and potential elimination, of this tax deferral, including any appropriate transitional period or rules.
Interested parties can submit comments to email@example.com by July 24, 2017.