The Canadian Federation of Agriculture and the Canadian Federation of Independent Businesses have welcomed an NDP MP’s proposal to ease the transfers of business to the next generation.
Quebec MP Guy Caron’s bill says the small business corporations including farms and fishing operations should be able to be transferred to younger family members without being hit with onerous taxes.
Caron presented the bill to the Commons May 19 but it likely won’t come for debate until the fall.
Basically the bill would change the Income Tax Act to allow a small business to be transferred to children and grandchildren over the age of 18 without falling under federal rules, which treat such actions as anti-tax avoidance moves.
CFA president Ron Bonnett said the bill would ease the tax burden on farmers and business owners seeking to transfer their businesses to the next generation, noting that over $50 billion in farm assets are set to change hands over the next 10 years.
“In order to ensure the continuation of family farms in Canada, urgent efforts are needed to address the barriers hindering farm transfers to family members,” Bonnett said in a release. “We are pleased to see this issue move forward in Parliament and are hopeful it receives the political profile and priority it deserves.”
“Many small business owners are telling us that tax rules discourage them from passing on their firm to their children and encourage selling to a stranger,” CFIB president Dan Kelly said in a release. “Mr. Caron’s bill addresses this unfairness and will help small business owners ensure their firm remains locally owned, creating and protecting local jobs.”
Bonnett said farmers face significant and costly obstacles when attempting to pass their business on to family members.
“Specific tax rules pose disincentives to keeping farms within the family and actually incent sales to non-family members. In many instances, farmers find it less costly to sell their farms to outside buyers,” Bonnett said.
“Only half of small business owners have a planned succession, and of those, 76 per cent plan to exit their businesses in the next 10 years,” Kelly said in his release.
“Passing Caron’s bill would be a positive step forward for Canada’s small businesses.”