Manitoba Premier Brian Pallister, who ran a financial planning company specializing in farm succession planning, shared his views with Manitoba Co-operator reporter Allan Dawson on Sept. 28. The following Q & A was edited for length and clarity.
Q: What’s your reaction to the federal government’s proposed changes to taxing private corporations?
Brian Pallister: This is poorly thought out. This is destructive potentially to the family farm in the sense… it creates a disincentive for people to take risk and to enter into the farming life. We are going to lose probably half of our entrepreneurs. Our farmers are going to retire, many of them, over the next five years… and we need people to come in and replace them and I like to see family farms continue. I obviously have a bias in this coming from a fifth generation family farm. But I just believe family enterprise should be encouraged and not discouraged. It should be respected and not disrespected.
Q: What’s the biggest flaw in the proposal?
Brian Pallister: The biggest flaw is the language — the rhetorical flourishes about tax evasion. These are 40 and 50 year old rules. Many of these rules were developed by the senior Trudeau. So if they are loopholes why were they in place in the last number of years? They should not be described as loopholes. They are tax law and they are not designed to create the same situation as an employee as an employer. Employees need significant security and have the benefits that employers give up. So we need to have equitable tax rules and I think that is very valid to pursue. But I don’t see the case being made that the present rules are in any way unfair or inequitable. Someone can take risks like my dad and mom did for many years to build up a farm as many did across this country. My mom taught school for many years and donated to the farm — fed us, supported us, paid for many things when the farm could not. How is it to be unable, when the farm finds a profit, to… share some of that and be able to give some of that back to the woman who provided so much for it? This is what this sprinkling program was designed to do — allow families to give and receive at times when there was a profit. There isn’t a profit every year in most businesses.
Q: Isn’t income sprinkling a minor issue for farms?
Brian Pallister: It’s the intergenerational aspects that concern me from the succession planning standpoints — the capital gains piece — but also the treatment of retained earnings. We in the ag community benefit by being able to retain some earnings against future risk, or for future expansion , or maintenance, repairs, you know the deal. I don’t think these (proposed) rules were thought through. I don’t think they were developed by people who understand farming, who understand small business and enterprise. I think they were developed in Ottawa in isolation and not in full consideration of the challenges of in fact enforcing these rules if changed.
I would strongly suggest they go back to the drawing board. If there are reforms they wish to propose do them professionally and respectfully. Do not do them with disdain for small business people, and do not attempt to vilify small business people and farmers and professional people as well who have deferred gratification for years to get where they are, or have taken tremendous risks and who are central to our future economic growth. You are toying with the engine of growth here.
Q: The government says the changes are aimed at highly paid professionals who incorporated to reduce taxes.
Brian Pallister: What Ottawa is apparently wanting to do is create a dynamic of class warfare where we create a picture of some high, bigwig, corporate executive and everybody has distain for the benefits they accrue. My experience in small business is extensive… I have worked with people who had a good year and perhaps made six figures one year and then suffered for three following, and who were lucky to feed the family. I know the risks that farmers and small business people take. They too will suffer as a consequence of these rules. I know the rules, I understand them. I am a chartered financial consultant… I have met with professional accounting people as recently as the day before yesterday (Sept. 26) again to verify what the impacts could be on the family business or the family farm. They are significant. They are dangerous and quite frankly who do you trust to build the economy in Manitoba over the years to come? Is it the people who take the risks and create real jobs, or is it the people in Ottawa who tax those and take their money from them? I would rather that these hundreds of millions of dollars remain in the hands of Manitobans to be reinvested in our communities, on our farms, in our small businesses. That’s where our kids’ jobs are coming from.
They’ve got to back off. They have no choice in my mind.
Q: Is there any legitimacy to seeking tax inequity?
Brian Pallister: If they were focused on the people their public relations people… are talking about — the elite earner who is using offshore tax havens — or a variety of mechanisms that are not allowing money to be reinvested in the country, I think most Canadians would support that. What they’re aiming at is 350,000 Canadian small and medium sized enterprises that are the engine of growth.
You talk to… any accounting firm and they will tell you what they are proposing is not going to just impact the extremely wealthy person. It’s going to impact on the small, incorporated enterprise — the welding shop, or the guy that does the tile drainage, or the guy that does the garage, and the farms especially because of the intergenerational impact. I have been a long time advocate… for small and medium enterprise. It’s going to be the source for over 80 per cent of our jobs from every study I have read coming forward. We need these folks. This is where our jobs are going to come from. This is coming from the wrong thesis, coming from people who don’t understand the importance of small and medium enterprises.”