Feds urged to stay course on easing tax rules on sale of family firms
OTTAWA — MPs on the House of Commons finance committee have heard a plea from the country’s farmers that the government’s plans to rewrite tax laws shouldn’t make it difficult, again, to pass the family farm from parents to children.
Farmers and small business owners have for years asked the government to address an inequity in federal law that saw hundreds of thousands of dollars in extra taxes heaped on families that wanted to sell their company to another generation of owners.
A Conservative private member’s bill passed last month rewrote part of the Income Tax Act so business owners could pass on companies to their children or relatives at the same tax rate as if they were selling to a stranger.
The Liberals now say they plan to rewrite parts of the new rules to deal with loopholes that could lead to tax evasion.
Speaking to a House of Commons committee on Tuesday, Mary Robinson, a P.E.I. farmer and president of the Canadian Federation of Agriculture, urged MPs to make sure the Liberals’ promised amendments wouldn’t reintroduce the tax inequities that the bill, known as C-208, addressed.
“We believe the targets for future amendments can be addressed while maintaining this access for Canadian farm families. However, we believe this can only be assured through dialogue with farmers and farm advisers,” Robinson said.
First announced last month, the government’s plan to do its own rewrite of the tax laws created a heap of confusion, drew the ire of Conservative MPs and ultimately led to Tuesday’s rare summer meeting of the finance committee.
One day after the bill got parliamentary approval, the Finance Department announced the government would introduce amendments and apply the rules on family business sales starting Jan. 1, 2022.
Business groups expressed concern that the department was delaying implementing the new rules that left owners and families in a legislative limbo.
Parliamentary law clerk Philippe Dufresne told the finance committee that the bill officially became law when it received royal assent in late June even though it didn’t contain a specific coming-into-force date.
Liberals and finance officials told MPs that there was nothing out of the ordinary in what the government announced, although it might have just been misunderstood.
They pointed to a statement on Monday evening from Finance Minister Chrystia Freeland that said C-208 was the law of the land.
The Canadian Chamber of Commerce, the Canadian Federation of Independent Business and the Canadian Federation of Agriculture voiced their pleasure that government had cleared up confusion and would help with succession planning.
Freeland’s statement, hours before the committee meeting, also signalled the government’s plan to introduce amendments to close loopholes that could help people avoid paying taxes.
She cited the possibility of converting dividends to capital gains to take advantage of the lower tax rate without any actual transfer of the business.
Any changes would apply no earlier than Nov. 1.