Provincial tax change means big savings for farmers

Friday, April 3, 2009

© AgMedia Inc.

by TREENA HEIN and BETTER FARMING STAFF

Livestock producers will have to shell out 13 per cent on top of their vet bills when Ontario merges its provincial retail sales tax with the federal goods and services tax in July 2010.

They’re not the only ones. Farmers commissioning custom farming can also expect to pay the double digit tax. For $40,000 worth of custom farming, that amounts to $3,200 and farmers will have to figure out how to pay up front when planting.

That’s the only downside for farmers as the province prepares to introduce the new harmonized tax. 

The Ontario Federation of Agriculture estimates that the harmonized sales tax will save the province’s farmers $20 million annually on provincial taxes that they used to have to pay for big ticket items like farm trucks, and another $10 million annually on office supplies and equipment such as computers and water treatment. 

A farmer will save $2,200 on a farm truck costing $28,000 says federation policy researcher Ted Cowan.

Under current provisions, farmers can apply for tax refunds on GST-qualifying farm-related expenses such as vet bills and custom farming.

That won’t change for the harmonized tax, says Scott Blodgett, spokesman for the Ontario finance ministry. And farmers will still have to apply for the new tax credit. “All rules which currently apply under the GST would still apply under the new single tax rules,” he explains.

Livestock producers will need to do some financial planning to prepare for the harmonized tax, warns Bill Mitchell, spokesperson for Dairy Farmers of Ontario. If vet bills are large, the taxes on them are also large. Farmers will have to bridge that cost until the tax is returned to them. 

Blodgett says the tax can be refunded every three months.  

Although there’s a cash flow impact, Mitchell says the dairy industry is relieved “that tax on vet services will remain refundable.”

Angela Cerovic, a spokesperson with the Ontario Veterinary Medicine Association, says her association is also “pleased” taxes on vet services will remain refundable to livestock producers.

The new harmonized tax will also replace GST on veterinary bills for farming family pets with no tax rebate available.

Cowan says the federation has been in favour of a harmonized tax since the GST came into place. Now farmers in Ontario will be treated the same way, sales tax wise, as they are in Quebec. 

The merger, announced in last month’s provincial budget, will apply to all items currently covered by the GST. Exempt are children’s clothing and footwear, children’s car seats and car booster seats, books, diapers and feminine hygiene products.

What will happen to items currently covered under the provincial retail sales tax but not GST? Some small service providers who earn less than $30,000, for example, are not required to collect GST but must collect the provincial tax.

Blodgett says the province isn’t making a list of these items and emphasizes the new harmonized tax will only apply to items triggering the GST. “Take a look and see what’s on the CRA website,” he says. “See what’s there now. That’s what will be covered,” other than the exemptions. BF