No penalties for selling to co-ops

Farmers and fishermen who sold to co-operatives will not be penalized by new tax reforms.

Egmont MP Bobby Morrissey says that because of taxation changes made last year, fishermen and farmers who formed corporations and sold their product to co-operatives were in danger of having their income taxed at 33 per cent, instead of 15 per cent.

The 2016 budget changes, he said, were meant to close a loophole that enabled individuals to form multiple corporations to split their earnings to place them in a lower tax bracket.

Morrissey said concerns started to arise last fall, and then came to a head over the winter, that primary producers who had registered their farm or fishing operations as corporations and were selling to co-operatives could be caught up in the same tax measure.

Morrissey said Malpeque MP and finance committee chairman Wayne Easter recognized the impact and also pushed hard to have the measure corrected.

Morrissey said the 15 per cent tax rate was meant for primary producers and manufacturers, but others were finding loopholes to take advantage of the lower rate, prompting measures last year to close the loopholes.

“It was never our intention to capture primary producers selling to co-operatives,” Morrissey insisted.

In P.E.I., the MP said, concerns about the tax measure were first raised by Amalgamated Dairy Ltd., a co-operative. He said all dairy farms in P.E.I. are corporations and they all sell to ADL, so there was grave potential they’d all see a big increase in their tax rate.

The Egmont MP offered assurance during the annual meeting of Royal Start Foods in Tignish recently, but it was not until the official announcement that he could confirm they would not be hit with the high tax rate. The changes are retroactive to March 21, 2016.

Morrissey said he is aware of a co-operative in New Brunswick losing members because those fishermen feared a higher tax rate if they stayed. He said there was potential for the same thing happening with fishermen’s co-ops in P.E.I. if the Income Tax Act wasn’t corrected.

“Fishermen were getting nervous.”

“You’re coming in and you have all kinds of options to sell your product. Why would you sell to one buyer, because it is a co-operative you belong to, and be taxed 18 per cent higher?” he asked, paraphrasing the concerns.