Federal tax breaks or benefits passed on to citizens through taxes not being assessed are leaving less money in farmers’ pockets, according to finance department figures.
As recently as 1999, the federal finance department said the farm sector taxes it was collecting were worth more than half a billion dollars. This year, the government’s anticipated “loss” from such tax breaks plunges 40 percent to just over $300 million.
The reason is changes to the tax laws, as well as tax cuts, according to the annual tax expenditure report issued last week by Finance Canada.
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It calculates the amount of money the federal government does not collect because of various tax break programs built into the system.
Critics of government tax policies mock the calculation as an example of government assuming that large parts of private income should by rights be government revenue.
They reject the idea that billions of dollars in tax expenditures are sums that the government has a right to collect if it had not made an exception and done taxpayers a favour.
The largest annual agricultural tax expenditure is the amount of lost tax Ottawa calculates from giving farmers a $500,000 lifetime capital gains exemption for farm property.
This year, the value of that tax break is projected to fall to $220 million from $365 million in 1999 and $325 million in 2000.
The reason for the drop is a change made last year by finance minister Paul Martin to reduce the capital gains inclusion rate from three-quarters to one half.
It also affects the value of tax deferral through the 10-year capital gain reserve, which will fall to $22 million this year from $51 million in 1999.
The government estimates the Net Income Stabilization Account program will cost it $15 million in lost tax this year.
While deferral of taxes on government contributions to NISA and on bonus and interest income will be worth $115 million in lost tax income, the government will collect $100 million in taxes on money withdrawn by farmers from their NISA accounts.
And the deduction of farm losses for part-time farmers from their off-farm taxable income will cost the government $54 million this year, compared to $59 million in 1999.
The finance department also calculates that its low tax rate on credit unions will cost the government coffers $46 million this year, although the value of that tax break will diminish over the years as corporate tax rates fall.
Still, these farm and credit union tax breaks offered by Ottawa pale in comparison to the billions of dollars of benefits it gives other parts of the economy.
The general low tax rate for small business is worth $3.9 billion this year. Research and development tax credits will be worth $1.2 billion.
The Canada child tax benefit is worth $7.8 billion and the government decision not to tax lottery and gambling winnings is projected to deprive the federal taxman of close to $4 billion in collections.
