It began in British Columbia, carried on through the Prairies and took root in Ontario.
A key issue as the House of Commons agriculture committee travelled across the country during the past two weeks discussing young farmer issues has been a call for changes to the capital gains tax for farm property transferral.
At a hearing in Kelowna April 26, farmers Clarence DeBoer and Stan Van Keulen told MPs current Income Tax Act rules that allow a tax break only if a farm property is transferred to children or grandchildren should be broadened.
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They called for nieces and nephews to be included as eligible recipients.
At later hearings, there were calls for rules to cover any transfer of farm property to the next generation, family or not.
DeBoer and Van Keulen said they both have farming brothers with no children who would like to pass the farm to their nephews or nieces.
“But the capital gain tax will be unbearable,” said DeBoer. “It is almost undoable for the operation to keep going.”
Van Keulen told MPs they could recommend the change to government on the basis that it would cost little in lost tax revenue but would be a big boost to intergenerational farm transfer.
An analysis prepared for them by Abbotsford, B.C., accounting firm Kinder Sidhu and Associates said a farmer passing his $7 million farm (in an area where land sells for up to $100,000 per acre) would face a tax bill of more than $1 million.
“If farming is to continue to thrive in Canada and we as a nation want to have our own food supply and not be dependent on foreign imports, then family farms need to be passed on to future generations without large tax burdens on death,” said the accountant’s analysis.
It noted that B.C. farmland values have increased largely because of urban pressure.
“As a result, farmers who do not have children of their own cannot pass on their farmland to relatives without first paying a large amount of tax on the inflationary land and quota values.”
At a committee hearing in Wiarton, Ont., May 4, Liberal MP Francis Valeriote raised the succession tax issue with accountant Wayne Ferris, who argued the current law is too restrictive.
Siblings, nieces and nephews should be able to inherit the farm without a huge tax burden as long as they commit to remaining in farming.
“It shouldn’t be seen as a tax shelter but rather to encourage farming,” he said. “We need to loosen the rules.”
