Ottawa-The decision to delay implementation to next year of a contentious change in the federal capital gains was welcomed by farm groups but they still want the measure dropped.

Responding to criticisms that the Canada Revenue Agency had implemented the tax change which has not been approved by Parliament despite being introduced in Budget 2024, Finance Minister Dominic LeBlanc shifted its implementation date to next Jan. 1. By then there will be a federal election and whatever government emerges from it will be able to decide what to do with the tax measure.

Kyle Larkin, Executive Director of Grain Growers of Canada, said his group remained opposed to the tax increase despite the implementation delay. “The tax hike has already forced many family farms to sell early and will increase the cost for most family-run grain farms that produce the majority of food that Canadians and the world rely on once implemented next year. Delaying bad policy doesn’t fix bad policy – it just drags out uncertainty, derails succession planning, and challenges the future of family farms.

“When this tax hike takes effect, it will also target farmers’ retirement plans, move the goalposts for the next generation of producers and further complicate the tax code, driving up accounting and legal expenses for all farmers. To protect family farms, we are continuing to call on the government to completely reverse the capital gains tax increase to ensure that family-run grain farms continue to be the backbone of Canada’s agricultural sector.”

The Canadian Canola Growers Association (CCGA) said it was pleased to see the government defer the capital gains changes. “However, we do not think that the proposed capital gains changes should be implemented at all. CCGA was one of the first groups to publicly speak out against the negative impact of these changes and the lack of consultation. We hope in future that tax changes do not follow this sort of process, which has caused significant concerns, confusion, and uncertainty amongst Canadian farmers.”

Nathan Phinney, President of the Canadian Cattle Association, said his association was pleased with the deferral. “We are proud to be among the groups representing Canadian farmers and agricultural producers who have been actively advocating against the proposed changes to the capital gains inclusion rates. We maintain that these proposed changes would negatively impact family farm succession and will continue our advocacy efforts against the proposed changes.” 

The change would increase the capital gains inclusion rate from one-half to two-thirds on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and most types of trusts. The inclusion rate represents the portion of capital gains that is taxable.

LeBlanc said that to ensure most middle-class Canadians do not pay more tax once the inclusion rate is increased, the government will maintain or enhance existing capital gains exemptions while creating a new investment incentive.

Among the exemptions being maintained and created are:

-A new $250,000 Annual Threshold for Canadians, effective in 2026, would ensure individuals earning modest capital gains continue to benefit from the current one-half inclusion rate;
-Increasing the Lifetime Capital Gains Exemption to $1.25 million, effective June 25, 2024, from the current amount of $1,016,836 on the sale of small business shares and farming and fishing property. With this increase, Canadians with eligible capital gains below $2.25 million would pay less tax and be better off, even after the inclusion rate increases.

The government will introduce legislation effecting the increase in the capital gains inclusion rate, the increase in the Lifetime Capital Gains Exemption and the introduction of the Canadian Entrepreneurs’ Incentive in due course, LeBlanc said.

This news item prepared for National Newswatch