The Canadian Federation of Agriculture (CFA) and Grain Growers of Canada (GGC) approve the direction of Finance Minister Bill Morneau's latest small business tax changes but are saving their final judgement until they can study the legislation that will be presented to Parliament in the New Year. They agree with other small business groups that implementing the changes for the 2018 leaves little time for farmers and business operators to make complex decisions. In mid December, Morneau finally delivered on his October promise to make his proposed small business tax changes fairer and simpler. His proposals were accompanied by more than 40 pages of proposed amendments to tax laws and technical notes that will keep accounting experts for some time. CFA President Ron Bonnett said Bill Morneau “has addressed a number of the key concerns identified by Canadian farm businesses.” However CFA wants “further dialogue with government officials to ensure the diverse contributions of farm family members are adequately accounted for. “This announcement provides greater clarity on income sprinkling and CFA looks forward to continued engagement with Finance Canada and the Canada Revenue Agency to ensure application of the rules is streamlined, clearly communicated and applied in a clear, objective fashion for all businesses,” he said. CFA will keep pressing the government “ensure any remaining issues are adequately addressed.” In addition to protecting intergenerational farm transfers, the government is excluding the capital gains from qualified farm property from tax on split income and is providing further clarification and definition on the contributions required for both capital and labour, he said. GGC President Jeff Nielsen welcomed the clarification to the rules governing splitting of income for private corporations. “Today's grain farm relies on contributions from all family members to succeed. Splitting of income is a legitimate tool to compensate family members for the hard work they do throughout the year and, in fact, their lifetimes.” Morneau's changes for family run businesses like farms are a welcome recognition of the important role that family members play on grain farms across Canada, he said. “The clarity around the qualifications for labour and capital, as well as the previously announced exclusion of capital gains on qualified farm property, are an acknowledgement that the government heard from GGC and the thousands of farmers across Canada who are being impacted by these changes.” The Canadian Federation of Independent Business called Morneau's announcement disappointing and called for implementation of the plan to be delayed until 2019. “It is extremely concerning to see the federal government drop this lump of coal during the busiest season for hundreds of thousands of firms and only days before all small business owners are expected to implement the new rules,” said CFIB President Dan Kelly. “This seems the very opposite of tax fairness. How our government expects small businesses to understand the new rules and make any needed changes to their corporate structures in two and a half weeks is beyond me.” While the announcement clarified some rules, “many types of business do not fall neatly in the categories outlined by the minister and will still be subject to the Canada Revenue Agency interpretation of reasonableness,” said Perrin Beatty, President and CEO of the Canadian Chamber of Commerce. “We do appreciate the government is trying to simplify the criteria around income sprinkling, but an issue of this complexity cannot be rushed.” He too criticized the Jan. 2018 implementation date. “It is unreasonable to expect businesses will have time to adapt to this announcement, especially at this time of year. Instead, we'd much rather see the deadline pushed back a year.” The Morneau announcement came on the heels of a call by the Senate Finance Committee for the government to the drop the current plan and undertake an independent review of the tax plans. Otherwise it should delay implementation of the plan to 2019, the Senate committee said. Even with the changes announced in October, the tax changes “will be complicated to apply, require significant paperwork, and rely on the subjective determination of tax auditors, inevitably leading to inconsistency and litigation,” Beatty said. “After signs the government was starting to listen to the voices of entrepreneurs, this is another blow,” Kelly said. “It is particularly worrisome that these changes have not been legislated or studied to ensure there are no unintended consequences.” It appears the government has accepted some improvements by excluding certain family businesses from the new rules, which includes spouses of business owners over age 65, he said. However they don't take into account many of the formal and informal ways family members participate in the business. “Business owners will be worried that they could see their red tape burden increase significantly in order to prove they qualify for one of the exemptions or can meet the 'meaningful contribution' test,” he said. CFIB will continue to review the revised proposals and seek input from tax professionals. “It is deeply worrisome that the CRA—the same agency that thought it was a good idea to tax the dishwasher's discount on his pizza lunch—will now be asked to determine whether the contributions of a mom and pop shop warrant the salary and dividends paid to mom and pop each year,” Kelly said. The Senate report noted that “various governments have made incremental changes to the tax system, which has become bloated, complex and cumbersome. The last comprehensive review of the tax system took place in the 1960s; the committee believes it is long past time for the government to take a close look at our existing system. “If the government truly wishes to make meaningful, lasting changes toward a fairer tax system — and maintain Canada's competitiveness with other countries that have simplified their own tax codes — the committee believes the government must embark on a full review of the tax system. It would be an ambitious, time-consuming and difficult project. But, done well and with input from Canadians, it would leave a lasting legacy of stability and profitability. Alex Binkley is a freelance journalist and writes for domestic and international publications about agriculture, food and transportation issues. He's also the author of two science fiction novels with more in the works.