Succession planning at risk

Frustration over Ottawa’s proposed changes to small-business taxation continues to mount

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Farmers are being urged to join the chorus of opposition facing the federal government’s proposed tax changes.

Manitoba’s minister of agriculture has already added his voice to the growing calls for Ottawa to reconsider the massive overhaul and Keystone Agricultural Producers is asking its members to participate in government consultations before the October 2 deadline.

“This is very concerning for us,” said Minister Ralph Eichler, speaking to the Manitoba Co-operator last week. “We see this as a next step in succession planning, not a way to try and beat the government out of tax dollars. It’s more of a way to ensure that the next generation of farmers will be able to take over and assume that farm.”

The proposed changes will make it more difficult to share farm income with spouses and children, discourage farms from renting out land and make it harder for farmers to sell land to their own children.

“We should be putting rules in there that make it easier for succession not more difficult,” said Keystone president Dan Mazier. “The average age of a farmer is 55 or 56 years old in Canada and in the next decade there is going to be billions of dollars’ worth of land and assets being transferred in some way, shape or form. So I think we need to get on and look at capital and tax structures and have that conversation, that’s a very healthy conversation, but that is not what this proposal is.”

He added it’s frustrating to hear farmers be lumped into a category with tax cheats or the ultra-wealthy, rather than recognized as small-business owners using the tools available to them. Income sprinkling is no more a tax loophole than an education rebate, Mazier said, adding the tax code should be set up to help businesses overcome the challenges faced by their respective industry.

“They are calling this a loophole; that’s not right, we all live within the taxation system and run our businesses within it and have tools available,” he said. “There is a whole system set up, not for loopholes, but to incentivize farmers to spend more money, or invest back into your business… that’s how businesses are built.”

Eichler noted that as small-business owners, producers don’t have a lot of safety nets.

“As you know we don’t have maternity leave for farmwives, we don’t have unemployment (insurance) we can rely on, this is a business all of its own, a unique business, but one that feeds the world, so we can’t put them at risk and we’re very concerned about that particular proposal that’s being brought forward by the federal government,” said the minister.

Producers have also been critical of how the changes were introduced and when consultations are taking place. With the 75-day-long consultation period falling during farmers’ busiest time of year, Mazier said it has been challenging for producers to get out and have their voices heard.

“Getting clarification has been really difficult as well… just trying to get to the bottom of what these proposed changes would mean has been really difficult,” he added.

In its analysis, the Canadian Federation of Agriculture has said that “if these changes are implemented as proposed, farmers will face higher costs with fewer options to manage business risks, and the complexity of the proposals could lead to other unintended consequences” and that the “added uncertainty could discourage business investments right at a time when farmers are making plans to position their operations toward meeting the ambitious targets outlined in the 2017 Federal Budget, which identified agriculture as a key growth sector.”

Dozens of business organizations have raised concerns over the proposed changes, which would be the largest tax code revision since the 1970s, and the 42-member Coalition for Small Business Tax Fairness is pressuring the federal government to change course.

Eichler said that if those who drafted the proposal had a deeper understanding of agriculture and farm businesses, a better plan could have been brought forward.

“We need to have a clear understanding about the risks that are involved in running a family farm and whether they are incorporated or non-incorporated is really not important for the discussion — in my mind it’s about making sure they are sustainable long term in order to make sure that their family can come back to the family farm if they want,” he said. “They are proud of the fact the next generation may be able to take it over, but if this impact comes forward, it may limit the ability of the next generation to assume the family farm.”

This article was originally published on the Manitoba Co-operator.

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