We wish we didn’t have to write about the impact of COVID on the economy any more. Nevertheless, it appears this is going to be with us for several more months of uncertainty.
The situation will likely create many financial and taxation difficulties for the farming community, as well as all taxpayers.
There is no denying that during the pandemic, the economy needed the stimulation but this has caused the Canadian debt to double to more than $1.2 trillion.
The head of the Parliamentary Budget Office (PBO), Yves Giroux, cautioned that an “unavoidable” decision is fast approaching to raise taxes or cut programs. He also raised the point a few weeks ago that the current debt at more than $1.2 trillion was not sustainable by the Canadian economy for one year or two years at the most.
This places great uncertainty on Canada’s debt rating, interest rate levels and financial markets, which already show extreme volatility.
We don’t live on this planet alone. As Prime Minister Justin Trudeau’s father, former Prime Minister Pierre Trudeau once said, and I paraphrase, we sit next to the elephant that is the United States, and if the elephant rolls over we get squashed.
The U.S. is going through significant political, health-care and economic strains that will affect Canada as well. Our ability to trade with China in agricultural commodities or any other products it decides to protect makes us vulnerable to forces beyond our control.
Financial markets are already in great flux, affecting commodity, international currency and securities. Gold is currently at an all-time high, which for the past 50 years has indicated a lack of confidence in the value of the U.S. dollar.
Securities markets are 90 percent controlled by large financial institutions that engage in computer program trading, so when a stock dips by 10 to 15 percent, it is automatically sold and that drops the bottom out of the market for that security.
These indicators might suggest we should take steps to mitigate potential problems before they have the opportunity to migrate beyond our modest control.
It appears to be a harvest year with a good yield combined with the fact that a number of farms did not take their 2019 crop off until the spring of 2020. For this reason alone and the other conditions identified above, pre-yearend tax planning is highly recommended this year. Now is the time to initiate actions to take control of your 2020 tax bite.
Contacting your tax and financial advisers now will give you a heads up on how to plan your future in uncertain times.
Speaking to your stock and portfolio managers might also be advisable in a widely fluctuating stock market during a contentious U.S. presidential campaign with uncertain outcomes. This is particularly true for anyone who has turned 71 this year and must collapse their RRSP plans before the end of the year without transferring the portfolio to a registered retirement income fund (RRIF).
Waiting for the bitter end of the year to adjust your prospects might not give you sufficient time.
Grant Diamond is a tax analyst in Saskatoon, SK., with FBC, a company that specializes in farm tax. Contact: firstname.lastname@example.org or 800-265-1002.