Farmers: Please delay tax reform

The group representing 200,000 Canadian farm families is asking the federal government to delay some of its tax changes to at least 2019, saying farmers will not have enough time to adjust if the new rules kick in next year as proposed.

“It’s hard to recall an issue that has invoked so much concern from farmers across Canada,” said Ron Bonnett, president of the Canadian Federation of Agriculture, in an appearance at the House of Commons finance committee on Tuesday.

“Farmers have concern with the breadth of the proposals, the limited consultation occurring during harvest, and the immediacy of their coming into force.”

The CFA is part of the coalition of small business groups opposing the changes, and says its first preference is for the government to hold off and redesign the whole package of reforms. But if the government goes ahead, as it has signalled it will do, there are farm-specific items the CFA says are too rushed.

In particular, a proposed one-off opportunity in 2018 for farmers’ children to claim a capital gains exemption on farmland is causing concern. The CFA says farmers need more time to adequately prepare for that before the rules change. (The proposed restrictions on how children can claim farmland capital gains exemptions would affect all farms, not just the one-quarter that are incorporated.)

Bonnett said he’s been repeatedly assured by ministers that farms are not the focus of the proposed changes, but he remains deeply concerned about unintended impacts.

“Succession planning can take years, and many plans would become unusable as a result of these changes, leaving farmers having spent tens of thousands of dollars with little to show for it,” he told the committee.

The CFA is still working on its full report to the government, which is due by the Oct. 2 deadline on the consultation period for the proposed tax changes. But Scott Ross, CFA’s policy director, said their preliminary analysis of all the changes shows “additional tax liabilities well in excess of $1 million on a typical family farm over a 20-year period.”

In addition to the capital gains changes, farm groups are anxious about the planned changes to income sprinkling rules. The government intends to use a “reasonableness test” to ensure adult children are legitimately earning dividend income from a farm corporation.

Farmers say this test is too vague in a family-farm context, where relatives are often helping out in a variety of formal and informal ways, and worry they’ll end up in endless interpretation disputes with auditors.

The CFA says it’s also unclear how the proposed changes to passive investment income would affect rented farmland.