Tax changes a real threat to farmers

http://By Dan Mazier The federal government is seeking feedback until Oct. 2 for proposed small business tax changes, but that window falls during one of the busiest times of year for farmers. Farmers are still harvesting, but many are hearing about the proposed federal tax changes for private corporations — and they are seething. The proposed changes are complex, but what is known is that they will bring uncertainty for family farms that have incorporated. In Manitoba, we see that a quarter of the farms have incorporated, following a country-wide trend to address succession planning. It’s apparent that changes to the lifetime capital gains exemption will create disincentives to passing on the family farm to the next generation. Many farmers look at this as akin to stealing from their children. Many farmers’ assets are tied up in land and buildings. In the proposal, if these assets are turned over to the next generation, it will be at increased tax rates. There could be huge tax bills associated with these transfers. Changes to the capital gains exemption will threaten the future financial health of multi-generational farms — if they survive — and will encourage young people to leave an aging industry. The average age of Manitoba farmers is 55. This does not speak well to the long-term viability of the industry. The proposed plan also does not take into account the financial risk farmers take each year. If these tax changes are implemented, farmers will also face higher costs, with fewer options to manage business risk — which is inherent to farming because of climate challenges and global price pressures. Furthermore, tax planning helps farmers build resiliency to withstand year-to-year instability as a result of crop loss, low livestock prices and natural disasters. Although they are small businesses, farmers must invest in millions of dollars of machinery and inputs to operate their farms, and are at risk to rising interest rates. Tax planning for farmers is a legitimate practice to even out losses — and transfer the assets necessary to run the family farm to the next generation. It is not a loophole, as the government is calling it. I think the government is targeting those who use a corporate structure to hide income and avoid being taxed, but this is not the case with farmers. The prime minister has indicated in the recent past that agriculture and agri-food are key sectors for growth opportunities, but I can’t see how this growth will happen when farms may not be sustainable and may not be passed reasonably to the next generation. It may come as a surprise, or possibly a shock, that the prime minister said, “Agricultural policy must be developed from the farm up, not from Ottawa down.” However, he did say this at the 2014 Canadian Federation of Agriculture annual meeting in Ottawa. This is certainly not the case with these tax proposals. The complexity of the changes requires a thorough analysis by farmers and their financial advisors. However, the federal government only provided an 11-week window for the industry’s input, and this was from mid-July to Oct. 2 — one of the busiest times of the year for farmers. It’s clear that a meaningful consultation can’t happen during harvest. Many tax practitioners have had more than a month to review these highly technical changes to the Income Tax Act, and they are still studying them. Farmers weren’t consulted before these tax policies were developed, either, and I’ll argue that the government isn’t going to do meaningful consultation with our industry after they’ve been announced. So much for the farm up, and not Ottawa down. Targeting farms with these tax policy changes clearly demonstrates a lack of understanding about how and why farms across Canada are structured the way they are. The prime minister and finance minister need to shelve this tax plan they’ve announced, travel to some farms and spend serious time listening and learning about the complex challenges we face managing our operations. Dan Mazier is president of Keystone Agricultural Producers. He farms grains and oilseeds near Justice, Man. https://www.winnipegfreepress.com/opinion/analysis/tax-changes-a-real-threat-to-farmers-448131813.html KAP will make your voice heard on tax changes Let Ottawa know that you are against its proposed tax policy changes for private corporations. Fill in this form (https://docs.google.com/forms/d/e/1FAIpQLSfrkSdsDLfay1NuD5w6tREY-qqt4clMBeJzCFFkvQU13WXsXg/viewform) and KAP will mail a custom version of a letter opposing the changes to the finance minister and the prime minister. Still another way to make your voice heard KAP has sent letters to all Manitoba members of Parliament outlining our concerns with the proposed changes and the consultation timelines. We are also working with the Canadian Federation of Agriculture, and we ask that you add your name to the petition at the bottom of the page on the CFA website (http://www.cfa-fca.ca/action-alert-ask-your-mp-to-rethink-tax-proposals)By Dan Mazier

The federal government is seeking feedback until Oct. 2 for proposed small business tax changes, but that window falls during one of the busiest times of year for farmers.

Farmers are still harvesting, but many are hearing about the proposed federal tax changes for private corporations — and they are seething.

The proposed changes are complex, but what is known is that they will bring uncertainty for family farms that have incorporated. In Manitoba, we see that a quarter of the farms have incorporated, following a country-wide trend to address succession planning.

It’s apparent that changes to the lifetime capital gains exemption will create disincentives to passing on the family farm to the next generation. Many farmers look at this as akin to stealing from their children.

Many farmers’ assets are tied up in land and buildings. In the proposal, if these assets are turned over to the next generation, it will be at increased tax rates. There could be huge tax bills associated with these transfers.

Changes to the capital gains exemption will threaten the future financial health of multi-generational farms — if they survive — and will encourage young people to leave an aging industry. The average age of Manitoba farmers is 55.

This does not speak well to the long-term viability of the industry.

The proposed plan also does not take into account the financial risk farmers take each year. If these tax changes are implemented, farmers will also face higher costs, with fewer options to manage business risk — which is inherent to farming because of climate challenges and global price pressures.

Furthermore, tax planning helps farmers build resiliency to withstand year-to-year instability as a result of crop loss, low livestock prices and natural disasters. Although they are small businesses, farmers must invest in millions of dollars of machinery and inputs to operate their farms, and are at risk to rising interest rates.

Tax planning for farmers is a legitimate practice to even out losses — and transfer the assets necessary to run the family farm to the next generation. It is not a loophole, as the government is calling it. I think the government is targeting those who use a corporate structure to hide income and avoid being taxed, but this is not the case with farmers.

The prime minister has indicated in the recent past that agriculture and agri-food are key sectors for growth opportunities, but I can’t see how this growth will happen when farms may not be sustainable and may not be passed reasonably to the next generation.

It may come as a surprise, or possibly a shock, that the prime minister said, “Agricultural policy must be developed from the farm up, not from Ottawa down.”

However, he did say this at the 2014 Canadian Federation of Agriculture annual meeting in Ottawa.

This is certainly not the case with these tax proposals. The complexity of the changes requires a thorough analysis by farmers and their financial advisors. However, the federal government only provided an 11-week window for the industry’s input, and this was from mid-July to Oct. 2 — one of the busiest times of the year for farmers.

It’s clear that a meaningful consultation can’t happen during harvest.

Many tax practitioners have had more than a month to review these highly technical changes to the Income Tax Act, and they are still studying them.

Farmers weren’t consulted before these tax policies were developed, either, and I’ll argue that the government isn’t going to do meaningful consultation with our industry after they’ve been announced. So much for the farm up, and not Ottawa down.

Targeting farms with these tax policy changes clearly demonstrates a lack of understanding about how and why farms across Canada are structured the way they are. The prime minister and finance minister need to shelve this tax plan they’ve announced, travel to some farms and spend serious time listening and learning about the complex challenges we face managing our operations.

Dan Mazier is president of Keystone Agricultural Producers. He farms grains and oilseeds near Justice, Man.

https://www.winnipegfreepress.com/opinion/analysis/tax-changes-a-real-threat-to-farmers-448131813.html

 

KAP will make your voice heard on tax changes

Let Ottawa know that you are against its proposed tax policy changes for private corporations. Fill in this form (https://docs.google.com/forms/d/e/1FAIpQLSfrkSdsDLfay1NuD5w6tREY-qqt4clMBeJzCFFkvQU13WXsXg/viewform) and KAP will mail a custom version of a letter opposing the changes to the finance minister and the prime minister.

 

Still another way to make your voice heard

KAP has sent letters to all Manitoba members of Parliament outlining our concerns with the proposed changes and the consultation timelines. We are also working with the Canadian Federation of Agriculture, and we ask that you add your name to the petition at the bottom of the page on the CFA website (http://www.cfa-fca.ca/action-alert-ask-your-mp-to-rethink-tax-proposals)

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