Ottawa needs to extend consultations on proposed tax changes for incorporated businesses, including farm corporations, the Canadian Federation of Agriculture (CFA) says.
The CFA, which has joined the 42-member Coalition for Small Business Tax Fairness, is calling on farmers to voice their concerns about changes it says will hurt farm business planning. It also says a proposed deadline of Oct. 2 for the consultations is far too soon.
“These tax proposals represent transformative changes that would bring about major uncertainty for farms that are incorporated, especially for multi-generational family farms,” CFA president Ron Bonnett said in a news release Aug. 31. “The government must recognize that small-business owners face unique risks and costs, especially in agriculture where farmers must plan for a wide range of factors that can affect their operations from year to year.”
The Finance Department announced the proposed changes in mid-July and allowed for a 75-day consultation period, much of which is during farmers’ busy harvest time.
If implemented, the proposals will restrict small-business owners from sharing income with family members, limit certain forms of saving in the business, making the firm more vulnerable in bad economic times and less able to innovate and grow, and change capital gains rules which could make it more difficult for owners to transfer their business to the next generation, the coalition, led by the Canadian Federation of Independent Business, said in a news release.
In a letter announcing the proposed changes, Finance Minister Bill Morneau said the government wants to ensure Canada has a fair tax system.
“(O)ur government… is taking steps to address tax planning strategies and close loopholes that are only available to some — often the very wealthy or the highest income earners — at the expense of others,” he wrote. “Currently there are signs that our system isn’t working as well as it should, specifically when it comes to private corporations. There are worrying trends. There is evidence that some may be using corporate structures to avoid paying their fair share, rather than to invest in their business and maintain their competitive advantage.”
But according to the CFA, under the proposals farmers will face higher costs with fewer options to manage business risks. The complexity of the changes could also lead to other unintended consequences.
“The added uncertainty could discourage business investments right at a time when farmers are making plans to position their operations toward meeting the ambitious targets outlined in the 2017 Federal Budget, which identified agriculture as a key growth sector,” the CFA release said.