Feds refuse to back down on proposed tax changes

Farmers hoping for changes to federal tax proposals got little relief from Finance Minister Bill Morneau and Prime Minister Justin Trudeau last week.

The government’s apparent decision to stay the on course on tax revisions has left many tax planners pessimistic that the federal proposals can be substantially modified before they are implemented.

“Morneau and Trudeau seem to be doubling-down on the inflammatory rhetoric,” said Greg Gartner, a Calgary farm tax lawyer with Moodys Gartner, in an interview Sept. 15.

“I was giving them the benefit of the doubt until this week that this was mere ignorance.”

In an opinion piece provided to The Western Producer and in an interview on CBC radio, Morneau expressed sympathy and support for family farms, but did not back down from the tax proposals involving income splitting, capital gains taxes and cash kept within farm corporations.

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“I want to reassure Canada’s farm families, this isn’t about you,” wrote Morneau. “Hard-working small business owners, including family farmers, are not the focus of these changes.”

Farms that save cash within an incorporated farm to make future purchases of land or equipment will not be affected, he pledged.

“We will make sure these activities are not impacted. Period.”

However, Morneau didn’t back away from plans to reduce income splitting for people who cannot demonstrate “legitimate work” on the farm.

As well, he reiterated the government’s desire to clamp-down on tax-free land transfers to non-farming children.

“We do, however, propose to prevent the use of complex transactions designed to circumvent existing rules restricting the conversion of income (dividends) to capital gains,” said Morneau about the capital gains proposal.

Trudeau didn’t seem dissuaded from the proposals by a nationwide surge of outrage from small businesses, including virtually all major farm organizations.

“A lot of people have realized that these changes will take away benefits from wealthy folks,” said Trudeau in an interview on CBC.

“A lot of those wealthy folks are really fighting to keep those benefits that they have and they’re really making a lot of noise.”

While the federal government appears committed to the proposals, concerns are being raised form within the party and among backbenchers over the backlash that has arisen following the surprise summer announcement of the tax changes and the brief period set aside for comment.

“The communications was just God-awful,” Liberal MP, Finance committee chair and former farm leader Wayne Easter told The Globe and Mail.

“Whoever drafted that doesn’t have a clue about the amount of effort that goes into being a small business or how it’s established.”

Other backbenchers have also spoken out.

A coalition has been formed to fight the proposals. As well, on Sept. 18 a new coalition formed and announced it was backing the government’s proposed reforms.

Gartner’s firm has held seminars on what the changes could mean for small businesses and farmers and he said nothing he has seen or heard has alleviated his concerns.

“How is a prairie (family) farmer supposed to compete?” said Gartner about rules that favour communal organizations like Hutterite colonies and land aggregators like pension plans in buying farmland.

“All this is doing is making a bad situation worse.”

The federal NDP has said little about the situation, but the Conservative party has been relishing the public outrage. The Conservatives are able portray the Liberal plan as an attack on struggling small businesses, entrepreneurs and families.

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