Ottawa-Proposed capital gains tax changes will negatively affect farmers and a full review of them should be conducted to address the many concerns they have created, says the Canadian Chamber of Commerce and national agriculture organizations.

Hundreds of thousands of Canadian companies, many of them agricultural, are likely to be directly impacted during the next 10 years and the effects of this tax hike will be borne by all Canadians, directly and indirectly, Jessica Brandon-Jepp, the Chambers Senior Director of Fiscal and Financial Services Policy, said in a statement.

“Despite the small increase in the Lifetime Capital Gains Exemption, many agricultural operations are likely to expend the lifetime exemption with land values alone, therefore the expanded Lifetime Capital Gains Exemption is not enough and the increase in capital gains will negatively impact farmers,” she said.

“We remain concerned by the proposed changes to the capital gains inclusion rate – these measures will harm many small and multi-generational businesses, discourage investment in Canada, further impede productivity, and contribute to brain drain. When combined with other tax measures being implemented and 2018 corporate tax changes which are beginning to be phased out, the cumulative impacts on our economy are significant.”

A full review of the tax system should be undertaken to simplify it, make it more efficient and fairer, and ensure Canada is an attractive place to do business.

Brandon-Jepp said “it is so troubling that the government has not provided sufficient detail on the long-term impact of these changes nor given Canadians the opportunity to plan their affairs in a reasonable time frame.”

Government explanations are not reassuring. “Ongoing uncertainty will hurt our economy and our ability to provide a better life for Canadians. We need clarity and reassurance from government – for both Canadians and Canadian companies – as businesses and families scramble to understand this tax change.”

Farm organizations are working on a detailed joint statement position which provides further details on how the capital gains changes will adversely affect their members that is due to be released soon, said Scott Ross, Executive Director of the Canadian Federation of Agriculture.

Grain Growers of Canada said the proposed changes to the capital gains inclusion rate are a serious concern for grain farmers across Canada. Despite the increased Lifetime Capital Gains Exemption, the substantial rise in land values over the years means most farmers will exceed this limit. “This exposes grain farms, 97 per cent of which are family-owned and operated, to higher tax burdens and penalizes those who are trying to pass down their farms to future generations.

“Preliminary research by Grain Growers of Canada, in consultation with stakeholders and accountants, has found that the changes will result in up to 30 per cent more in taxes paid, which accounts for hundreds of thousands of dollars lost by individual grain farmers. Moreover, there is a lack of detailed information and clear timelines from the government.

“It is unclear how these policy changes will affect land transfers currently underway and whether grain farmers will be eligible for the Canadian Entrepreneurial Incentive, making it difficult for farmers to plan and adapt. Grain farmers across Canada seek clarity on the proposed legislation and consideration for those who are transferring their farms intergenerationally.”

Crosby Devitt, CEO of Grain Farmers of Ontario, said the government should “examine the proposed changes to the tax treatment of capital gains in the 2024 federal Budget to ensure that grain farms and their food production capacity are not adversely impacted. Grain and oilseed farmers in Ontario operate in a highly competitive environment and cannot bear additional costs that would put them at a competitive disadvantage compared to U.S. farmers. We urge the Canadian government to prioritize the needs of Canadian farmers by crafting a tax system that fosters fairness and farm business sustainability to protect the food production system.”

The Canadian Cattle Association said it hears “regularly from farmers across Canada encountering significant and costly obstacles when attempting to pass their businesses on to family members. Given the impact of the proposed increase to the capital gains inclusion rate on intergenerational farm transfers, and in keeping with the overall spirit and objective of Budget 2024 to support Fairness For Every Generation, CCA is working with other stakeholders and looking into potential solutions to address the impacts producers may face.”

This item was prepared for National Newswatch