Changing the point-of-sale guidelines for the Net Income Stabilization Account program would cost governments tens of millions of dollars.
According to court documents filed by the federal government, if grain farmers included freight and elevation costs in the net sales figure used to determine NISA contributions, governments would have had to contribute an extra $42 million in each of 1996 and 1997.
The federal government alone would have had to shell out an extra $28 million per year, according to an affidavit from Roger Eyvindson, director of policy development at Agriculture Canada.
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Applying the changed guidelines to commodities other than grain would significantly increase the cost of the program, the documents added.
The court documents are part of a case a farm tax planning company wants to bring before the Federal Court of Canada.
Farm Business Consultants Inc. wants a judicial review of NISA’s point-of-sale guidelines which, in most cases, prevent prairie grain farmers from including freight and elevation costs in the net sales figure used for NISA.
Eyvindson’s affidavit states that because the federal government contributes a fixed $600 million per year to safety nets, a third going toward NISA, changing the point-of-sales rules would have “significant financial implications” for other safety nets.
The documents also state the value of grain at an elevator does not include the costs of moving the grain to port.
“Such transportation costs were never included and are not now included in the eligible net sales figure for a producer as these costs are not a part of the value of the grain when it is delivered to the elevator,” the document states.
“The NISA program is not a grain transportation subsidy program.”
Before the Crow rail transportation subsidy ended in 1995, farmers paid for one-quarter to one-third of the freight costs for grain.
Farmers did not usually include these costs in their NISA applications, the affidavit states.
But in 1995, the value of grain at the elevator decreased because of the loss of the Crow, and some grain companies began printing transportation costs on grain tickets. That’s when many prairie farmers started to include the freight and elevation charges in their NISA calculations.
But Eyvindson’s affidavit explains the point-of-sales guidelines have been in place since 1994, and state farmers can only include the value of grain to the point where they give up full and direct risk for it.
The affidavit states wheat and barley sold to the Canadian Wheat Board becomes CWB property upon delivery and grading of the grain.
As its test case, Farm Business Consultants used the records of John and Jean Boyko of Raymore, Sask.
After an audit of their 1997 NISA records, the Boykos had their eligible net sales reduced by $40,465, the value of their freight and elevation.
Their NISA accounts were clawed back by $1,213.95 in government contributions.
The Boykos were two of 16,500 farmers audited by NISA last summer over the same issue.
Farm Business Consultants contends the guidelines and clawback are inconsistent with NISA’s federal-provincial agreement, the spirit of the Farm Income Protection Act and Revenue Canada practices.
The case is still in its early stages in the Federal Court system.
