The Canadian Federation of Agriculture continues to push for a comprehensive review of the Income Tax Act
MOOSE JAW, Sask. — Finance Canada is holding consultations this month on how to enable intergenerational farm transfers.
Canadian Federation of Agriculture vice-president Norm Hall said the department committed to the consultations after efforts last summer and autumn to overturn proposed federal tax changes that would hinder farm transfers.
He told the Farming For Profit? annual conference that the changes the federal government eventually made weren’t perfect but they “opened up a space to discuss intergenerational transfers and treatment under the Income Tax Act.”
Hall will chair the western Canadian consultation in Regina.
He said the federal government’s target of $75 billion in agricultural exports by 2025 would be threatened by a policy that hinders investment in the industry.
“Tax policy directly affects the level of farm investment, influencing the extent to which farmers invest in new equipment (and) innovative technology, but also where these investments are made,” Hall said.
“Tax policy also affects how costly it is to transfer your farm and dictates your operational structure.”
Farming is subject to unique variability in income, he said, and tax policy can help in that regard.
The CFA continues to push for a comprehensive review of the Income Tax Act, particularly in light of American tax reforms that will affect competitiveness, he told the conference.
“We believe this also warrants some immediate actions to respond to this change in competitiveness landscape,” Hall said.
Those include ensuring farms can use small business deductions. Hall said 2016 changes mean farms could lose the deduction if they sell product to a related business.
“An exemption for affiliated farm corporations is needed to address this,” he said. “There are also restrictions on the ability to claim farm losses if the farm isn’t your primary source of income, and this needs to be addressed to ensure non-farm investors can invest in agriculture like any other sector.”
He said there should be an offer of first-year depreciation on farm equipment, which is available in the United States.
And, he said the next generation has to be able to financially help operations. Changes to the definition of family member to include more than just children and grandchildren would be beneficial.
“Second, make sure siblings and other family members don’t face unique barriers that non-family members don’t,” he said.
Asked if the agriculture department had been aware of the proposed tax changes before they were made public, Hall said agriculture department staff said they knew nothing.
He noted that similar proposals from finance made during the previous Conservative government didn’t go anywhere.
Ken Rosaasen, a farmer and retired agricultural economist, said he understood the same thing had happened with the proposal to end grain cash ticket deferrals.
Hall said finance officials believed that since the Canadian Wheat Board had been abolished, farmers didn’t need the deferrals anymore and were set straight by farmers.
“They finally said, ‘yeah, OK, business as usual,’ ” Hall said. “That means we’re deferring all grains, but according to legislation there’s only five grains available for deferral — wheat, barley, oats, canola and flax. So, is it business as usual or business per legislation? They’re looking into that.”
He also said CFA asked officials to look into livestock deferrals as well so that producers don’t have to wait for drought or flood and someone to decide they can claim tax deferrals when they have to downsize herds.
Conference host and University of Florida agricultural economist Andy Schmitz said he’s convinced that bureaucrats in Washington know nothing about farming or agriculture.
“Does anybody know anything about agriculture in Ottawa?” he asked.
Hall said federal bureaucrats, most from the East and urban, know little about western agriculture and many MPs are in the same position.
“Trying to get the western view over there is extremely difficult,” he said.