Tax proposals about fairness: minister

Our government is committed to Canada’s farmers and growing the agri-food sector.

In our last budget, we recognized the agri-food sector as one of the most important for Canada’s economy, setting an ambitious goal to increase agri-food exports to $75 billion by 2025.

We also allocated millions to agricultural research and more value-added processing and defended Canada’s agri-food sectors internationally by restoring canola access and strengthening trade with Europe. 

We want to see farm families succeed.

Now, much has been said about our proposed tax changes involving private corporations. I want to reassure Canada’s farm families that this isn’t about you.

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We are committed to the middle class, including hard-working middle-class small business owners, farmers and fishers. What we are trying to address is the fact that a select few are using incorporation solely to gain an unfair personal tax advantage.

Hard working small business owners, including family farmers, are not the focus of these changes.

On income sprinkling, we will continue to support family farms where we know everyone pitches in. Using incorporation to shift income to family members who make no contribution to the business in order to gain a tax advantage is what we want to address.

Family farms where people do legitimate work will not be affected by our proposals. 

On passive investment, we understand that many farm businesses use these accounts to save funds for a rainy day or to purchase equipment or land. We will make sure these activities are not affected — period. 

For those who earn more than $150,000 and are using corporations to build unlimited, tax-sheltered personal savings accounts over and above RRSP and TFSA limits, we are proposing to change the rules in order to level the playing field. That is because some are creating accounts in the multi-millions, far beyond any Canadian’s RRSP limit.

That said, I know many Canadians have used these accounts to save for retirement, and did so legally, under the existing rules. That is why we will not go back in time to affect people’s nest eggs in any way, including investment income from those savings. Our proposals will apply only on a go forward basis.

Lastly, I’ve heard from farmers concerned that our proposals could negatively affect the transfer of farms to the next generation. Let me assure you that this is not our intent. 

We recognize the importance of maintaining family farms. In fact, in these consultations we are asking Canadians for their views on how to better accommodate family transfers.

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. These are sophisticated transactions — it is not simply the transfer of family farms from one generation to the next.

We remain committed to supporting young farmers by maintaining the tax exemption on intergenerational transfers and the $1 million lifetime capital gains exemption.

In all of this, let me reiterate that this is a consultation period, and that we are in listening mode. If you think these proposals inadvertently affect middle class farm families, we want to hear from you.

As we look to next steps, we are committed to the principle of tax fairness for the middle class. By addressing a system that disproportionately benefits the wealthy, and asking them to pay their fair share, we are keeping taxes low for the middle class and small businesss and helping those who need it most.

I know you work hard. I know you pay your taxes and you follow the rules. And if you are a middle class family working hard to grow your business and leave something for the next generation, let me assure you that you are not the focus of our changes. I look forward to working with you on making sure we get them right. 

Bill Morneau is the federal finance minister.

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