by JIM ALGIE
Farmers disposing of agricultural properties can qualify for an expanded, lifetime tax exemption on capital gains of up to $1 million as a result of Tuesday’s federal budget.
Finance Minister Joe Oliver announced the boosted exemption as part of a budget speech that included other tax relief measures for individuals and businesses. He also predicted a surplus on government operations in the current fiscal year, a year which includes an autumn election.
Opposition agriculture critic and other observers expressed reservations, however, about continued limits of farm spending in what has widely been described as an election budget. New Democratic Party agriculture critic Malcolm Allen said in an interview that Tuesday’s budget contained little of substance aside from the capital gains move. Ontario Federation of Agriculture President Don McCabe, reached by phone in Minneapolis, Minn., expressed cynicism about farm spending cuts in recent years that have helped “make a federal budget look good.”
He referred particularly to reductions in federal government spending on scientific research at Agriculture Canada and on business risk management programs for farmers. It hasn’t been an issue because of recent high commodity markets, the federation president said. However, this year’s return to lower market prices may require farm policy adjustments, McCabe said.
“We have to ensure we put in a safety net system that allows farmers to be sustainable in their own economics so we can take care of the rest of society’s needs while we’re at it,” he said. Reduced government support for the national Agri-Stability program has left policy gaps that need filling, McCabe said.
Agriculture Minister Gerry Ritz said in an interview that the budget continues his government’s emphasis on trade growth. The increased capital gains exemption is the third one under the existing Conservative administration and should help retiring farmers manage tax implications of recent, dramatic increases in farm land values, he said.
“When you look at the average age of farmers . . . there are a number that are talking (about) transferring it (the farm) . . . and they’re going to get caught with capital gains because they’ve gone up in value,” Ritz said. The move to a $1 million capital gains exemption saves about $27,000 in federal tax, he said.
Although the NDP’s Allen criticized “a light-weight budget for agriculture,” he welcomed the move on capital gains. His party has called for such an increase only at a higher level.
Allen also underlined the potential of an enhanced capital gains exemption to be paired with support for newcomers to agriculture. He described the budget move as “a step in the right direction,” but added “I think there’s a way to marry those programs with succession planning.”
If Tuesday’s budget was electioneering, it underlines the track record of a government which has emphasized freeing markets and individuals over the collective needs of farmers, Allen said. He pointed to last week’s sale of a majority stake in the Canadian Wheat Board as a case in point.
The sale to a U.S. and Saudi merchant partnership occurred despite a higher-priced offer from the farmer-owned business alliance, Farmers of North America, Allen said. It shows the government was “hell bent on making sure the Canadian Wheat Board didn’t stay in any form of farm control at all,” he said.
“Everything for them is about free markets,” Allen said. “It’s about taking away farmer ownership out of anything that gets done,” he said.
Asked to summarize his government’s agriculture policy, Ritz emphasized growth in production and trade. “We’ve seen our trade numbers increase. We’ve seen our ability to grow and produce climb. We’ve put in place measures and we’ve taken some measures out that were restricting the ability of farmers to do what they do best,” Ritz said. BF
Comments
Increasing the lifetime capital gains exemption to $1 million will serve little purpose except to entice even more farmers to fall victim to the land-buying mania on the part of supply managed farmers as they pay ever-dizzying price/earnings multiples in order to spend the windfall gains they receive because of the 200% tariff barriers they, and they alone, enjoy - or, in other words, this announcement simply gives an existing bully an even bigger stick.
Or, to look at it another way, Ritz and his minions never considered that the way to cool land prices would be to reduce the capital gains exemption, not increase it or, even better yet, simply get rid of supply management - the cause of the problem in the first place.
Or, to look at the matter from a cynical, yet completely-accurate point of view, the change in the capital gains legislation is a band-aid solution to a much-deeper problem caused by other legislation (tariff barriers propping up supply management).
Even more cynically, when Ritz claimed "We've seen our ability to grow and produce climb", he seems to be hoping that nobody has noticed that supply management has caused the Canadian dairy industry do the exact opposite.
And finally, Ritz is, of course, hoping that no farm income tax practitioner is going to point out the smoking gun of this announcement - the apparent lack of change to the alternative minimum tax regulations which completely astound farmers who believe that selling their farm capital gains-free means tax-free, and that, as any farm tax practitoner knows, completely horrifies anyone who has had to pay it, which is, by now, everyone who sells a farm.
AAAAARRRGGGHHHHHHHHHH!!!!!!!!!!!!!!!!!
Stephen Thompson, Clinton ON
Interesting that OFA president Don McCabe made the following comment while in the U.S. “We have to ensure we put in a safety net system that allows farmers to be sustainable in their own economics so we can take care of the rest of society’s needs while we’re at it,” he said. Reduced government support for the national Agri-Stability program has left policy gaps that need filling, McCabe said.
Easy fix Don it's called " Equity with the U.S. Farm Bill". Canada's Agristability has, at the current reduced 70% margin coverage, been effectively neutered. Meanwhile, the U.S. Farm Bill lives on. And when the going gets really tough U.S. politicians will be there again with even more emergency funding.
Not one mention of the most important part of the budget in the above article which is the increase in contribution to TFSA's. I encourage every farmer to make the best effort to use theirs(I know a few farmers that have them full).
Raube Beuerman
If the Canadian government wants to expand export markets and make us competitive on the world market, then why o why don't they require our inputs to be competitively priced? Example: check auto parts prices in Can. $
https://www.rockauto.com/catalog/raframecatalog.php
Most items are about 1/3 the cost of a similar part here in Canada. Ag parts are often far cheaper as well. So, how do we compete?
They should have lowered the exemption to $500,000 per person. You are right about the minimum tax.
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