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Editorial: Talking taxes

A few years back I found myself watching an HBO Canada series set in Winnipeg called “Less than Kind.”

One of the key characters was the patriarch of the Blecher clan, Sam, played by Maury Chaykin. Sam was a part-time driving school operator and full-time wheeler-dealer. Another recurring character was Tito, whom Sam had taken under his wing.

In a particularly funny scene between the two, Sam found himself under the auditor’s microscope one day at his shop at precisely the same time Tito stopped by to talk a bit of business.

Not realizing the third party in the room was the taxman, Tito was a bit too free with his words and revealed too much. His final statement, right before he found out he was talking to the auditor was, “It’s like you always tell me Sam. It’s our job to make it and hide it. It’s their job to find it.”

I tell this tale because it’s important to realize who you’re talking to when you’re talking taxes, and just how much you’re revealing. And talking taxes, it would appear, is going to be an ongoing theme for agriculture in the coming weeks and months.

In the past few weeks the issue of changes to personal corporations has really risen on the public agenda. I hear people talking about these changes. One of the most common phrases I also hear is “doctors and farmers.” As in, that’s who will be hit hardest by these changes.

In one way it’s good that people realize it will affect farmers and are sympathetic enough to you that you’re held up as an example. In another way, however, know you’re being used. Doctors and farmers are sympathetic characters and it’s no mistake they’re the face of the opposition.

A lot of different professions use these kinds of personal corporations, from plumbers to marketing gurus and everything in between. During the energy boom it was apparently very popular amongst petroleum engineers, for example, who were able to lower their tax burden on healthy six-figure salaries to somewhere around 25 per cent, compared to the far higher rates their salaried colleagues were paying. But you don’t hear anyone waxing on about poor engineers or lawyers, they’re simply not as sympathetic.

The risk here, of course, is your sectoral goodwill will be depleted by others and won’t be there when you need it for other crucial conversations. How this tax conversation is held is going to be very important.

I’ve been following some of the back-and-forth in opinion columns and even online forums, just to get a sense of things. One thing I have seen, repeatedly, is that the folks who are arguing against the changes often take an unfortunate tone.

It can be summed up as a smug superiority, that they’re better and more deserving of these breaks than the chumps who work for a salary because they’re braver and take on more risks and create jobs. In the worst cases, they couldn’t contain their contempt for the people they were interacting with.

In some cases the job creation argument is undoubtedly true. In other cases, as noted, it’s a lot more debatable, and incorporation really is a shell game to lower taxes. Regardless the reality of the situation, taking that confrontational approach isn’t going to win any friends or influence many people. It could, in fact, see people get their backs up and result in an outcome nobody wants to see.

One issue that seems to gain traction amongst those who don’t really have a strong opinion one way or the other, is the question of “income sprinkling” where a corporation pays family members such as spouses and children, thus lowering the overall tax burden. They look at it and wonder, “why can’t I do that?”

The answer, of course, is because the country could never afford it. It would leave a smoking crater in the national bottom line. So I am coming to suspect that one will be tough to defend because allowing only one group to do it smacks of unfairness to wage earners.

Another way to look at this is in its similarity to the Harper government’s crackdown on income trusts. That government saw a tax strategy becoming too popular for its own good, affecting revenues dramatically, and killed it, ignoring all protests.

Like it or not, that precedent suggests change is coming, which is going to make how this conversation is held even more important.

Farmers need to decide on the elements that are really important to the sector, what they can live without, and the substance and tone of the conversation they’re about to have. Having a united front with clear goals for the sector is paramount.

They’ll also need to decide just how much water they’re willing to carry for someone else — and how willing they are to have their good name used.

About the author

Editor

Gord Gilmour is Editor of the Manitoba Co-operator.

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