Yes, Hutterites do pay taxes

Michael Walter walks his irrigation equipment across one of the vegetable gardens at the Cayley Hutterite colony.  |  Mike Sturk photo

Hutterites and Hutterite colonies pay income taxes.

In fact, they often pay more than their non-Hutterite farming neighbours.

“It’s a very common myth,” said MNP regional managing partner and certified professional accountant Gord Tait.

“The biggest myth … is that Hutterites don’t pay income tax or that they pay significantly less than others.

“It is actually a matter of fact — Hutterite colonies pay much more income tax because they’re Hutterite than they would pay if they were simply farming as non-Hutterites. And that’s a massive issue and many people are shocked by that in Canada in 2018, but it is a fact. It’s not an opinion.”

The common myth may have arisen from a court case involving a Hutterite branch that refused to pay taxes for religious reasons. It fought to the Supreme Court of Canada. That resulted in special taxation agreements but not exemptions.

There are about 40,000 Hutterites in Canada, about 10,000 of them in southern Alberta and others in Manitoba and Saskatchewan, said Tait. Many have large farming operations and all support multiple families.

Taxation is a major issue for colonies but that taxation is applied through Section 143 of the Income Tax Act, which Tait said was essentially developed to address Hutterites.

“The main, fundamental basic purpose and intent of that section was to tax the income as if it had been earned by the individual families in the congregation, which seems very fair,” Tait said at a May 31 meeting of the Southern Alberta Council of Public Affairs.

The applicable section came into force in 1977 but was punitive from the start, he added.

Though most colonies are corporations, they are not taxed as such. Earnings are considered part of a deemed trust and income is allocated to the adult beneficiaries, who file returns and are taxed as individuals.

Income from colony members younger than 18 is not recognized and is instead allocated to the adults, even though most Hutterite children leave school at age 15 or 16 and become working members of the colony, said Tait.

Colonies have fewer tax brackets, resulting in higher tax rates, and are denied the benefits of Registered Retirement Savings Plan deductions. Colonies pay school taxes but also build their own schools and pay wages for the Alberta certified teachers, for which they get no deduction, said Tait.

Until 1993, they could not claim charitable donations.

Tait said the tax laws that apply to Hutterites are discriminatory, although that was not the intent when section 143 was developed.

“The problem is that those tax rules were established in the ‘60s and the ‘70s and unfortunately they haven’t been updated and changed as many other parts of the income tax have. And that’s what’s left colonies at a disadvantage.”

He and members of the Hutterian Brethren are lobbying the federal government to change the income tax laws. A 2014 Canada Revenue Agency decision to deny Hutterites the working income tax benefit, a refundable credit for low-income Canadians, provided further impetus to lobbying that began in the 1990s.

Tait said the low-income deduction would apply to many Hutterites, who own everything communally and do not accumulate personal assets.

He said MNP files about 20,000 individual tax returns for Hutterite colony members and about 75 percent have taxable income of less than $25,000.

Changes to taxation pertaining to Hutterites were the subject of a Senate hearing in March, after which the Senate recommended changes.

John Waldner, a manager at King’s Lake colony in southern Alberta, was among the presenters at those hearings and said he was encouraged by the response.

“We are very positive. We’ve had some good feedback from a lot of people that think fair is fair. Who can argue with fairness?”

Waldner said he has often heard the view expressed that Hutterites don’t pay taxes or get certain tax advantages and he hopes the Senate presentations will help dispel myths.

“I can tell them we pay taxes, but when you say it in front of the Senate, I think it carries a little bit more clout.”

Tait said he has broached the issue of needed taxation changes in at least 15 trips to Ottawa to meet with government officials, and he has found them receptive.

“We have to remember that a Hutterite colony is literally nothing more than a family farm. It’s just a bunch of families, living together, and farming,” he said.

“It’s nothing magical. It’s nothing special. We can all do it. But without the strong faith-based lifestyle, I think it becomes challenging. But let’s remember that Hutterite colonies are probably the best example that exists of a successful family farm.”

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