Ottawa-The capital gains tax changes that Liberal, NDP, Bloc Quebecois and Green MPs passed on June 11 are disappointing and frustrating to farm organizations across the country because they are being rushed through at a time of the year when producers are especially busy and cannot consider their implications.

The Canadian Federation of Agriculture (CFA) criticized the decision to ignore calls to delay the proposed changes to the capital gains inclusion rate beyond its June 25 implementation date. Such a short timeline does not allow Canadian farm businesses to fully assess the potential implications of these changes for farm succession tax planning purposes and adjust accordingly.

Grain Growers of Canada (GGC) said the capital gains inclusion rate changes will increase taxes by 30 per cent on family-run grain farms at a time when 40 per cent of Canadian farm operators are expected to retire during the next decade. This approach could jeopardize the transfer of assets from one generation of farmers to another.

The Canadian Cattle Association said there has not been enough time to properly assess the magnitude of implications these changes will have on the beef industry. “We urge the government to press pause on this implementation and have discussion the impacts with farmers more fully.”

Crosby Devitt, CEO of Grain Farmers of Ontario, said the government should examine the proposed changes to capital gains tax treatment “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 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 farm groups were not alone in their disappointment. The Canadian Chamber of Commerce said that capital gains tax change will “build uncertainty, stifle investment and signal to the world to do business elsewhere. Our tax system has become a complicated, politicized web of carve-outs and caveats. We need to end our reliance on tax-and-spend politics, which is undermining innovation and growth, and undercutting future generations.

Jessica Brandon-Jepp, Senior Director, Fiscal and Financial Services Policy, said that “While these capital gains increases continue to be defended as a matter of generational fairness, generational fairness should consider the actions we are taking today at the expense of our future prosperity and economic opportunity.”

CFA President Keith Currie said while the Lifetime Capital Gains Exemption (LCGE) was increased to $1.25 million, the capital gains inclusion rate was also increased from one half to two thirds. “By increasing the capital gains inclusion rate, we are neutralizing the increase to the LCGE threshold and jeopardizing the success of genuine intergenerational farm transfers and the financial health “of the next generation of farms across Canada.

“By ramming these very significant tax changes through while farmers are in the field planting, we aren’t giving producers enough time to fully assess the implications for their families and their businesses.”

GGC Executive Director Kyle Larkin said the tax changes must not jeopardize the transfer of assets from one generation of farmer to another, but rather encourage the next generation of farmers to take up the calling, drive much needed rural economic activity and help the agriculture sector reach its growth potential.”

“Our research shows that an average grain farm in Canada, most of which are family owned and operated, will see a tax increase of 30 per cent due to the two-thirds capital gains inclusion rate. This hike targets farmers' retirement plans, complicates intergenerational transfers, and threatens the long-term viability of family farms across the country.”

According to GGC research, an 800-acre farm purchased in 1996 in Ontario would incur nearly $1.2 million in additional taxes if sold today. “With over 40 per cent of farmers nearing retirement over the next decade, this tax increase introduces substantial uncertainty into their retirement planning.”

CCA President Nathan Phinney said the increase in the inclusion rate could negatively impact family farm succession planning.  The government “should pause implementation and thoroughly study the proposed changes to understand the impacts.”

CCA and its Youth Council urge the federal government to exempt farmers from the increase to capital gains and ensure that the changes do not jeopardize the smooth intergenerational transfer of assets. CCA wants to hear from farmers how these proposed capital gains changes may affect the succession of their family farming operations by emailing their farm succession planning to [email protected].

This news item prepared for National Newswatch