Alberta farmers urge Ottawa to rethink proposed tax rules

Alberta farmers are urging the federal government to rethink tax reforms they say could destroy family farms.

'That's my retirement. I mean, everything I have is tied up in land and buildings and machinery' says farmer

Critics say the Liberal government's proposed tax changes could wipe out family farms across Canada. ((Dave Gilson/CBC))

Andrew Peden seeded 3,000 acres at his central Alberta farm this year, working the same land as his father, grandfather and great-grandfather all did before him. But he fears the Liberal government's proposed tax reform could end that legacy.

"It's taken us a hundred years to get to here and now they're going to take it away with the stroke of a pen," said Peden, who farms about 150 kilometres east of Edmonton. "To penalize the next generation for wanting to carry on a family farm is absolutely wrong."

Initially pitched as a move to ensure wealthy Canadians were not paying less tax than the middle class, the backlash quickly grew among doctors, lawyers, accountants and small-business owners.

Critics warn the controversial reforms could wipe out family farms by making incorporated operations less competitive and driving up the cost of passing them down to the next generation.

By his calculations, Peden figures the income he would make renting out his land to his son to bring him on board, would be taxable at more than 70 per cent.

It's taken us a hundred years to get to here and now they're going to take it away with the stroke of a pen.- Andrew Peden, Alberta farmer

"That's my retirement," he said, calling for the government to make farmland exempt from the rules. "I mean, everything I have is tied up in land and buildings and machinery."

The federal government has set a deadline of Oct. 2. for Canadians to weigh in on the changes. According to Peden, the timing couldn't be worse.

'Busiest time of year'

"They couldn't have done this at a worse time," he said. "This is the farmers' busiest time of year."

Lynn Jacobson, president of the Alberta Federation of Agriculture, urged Ottawa to allow more time for consultations, noting a large proportion of farmers are still in harvest mode.

He said with emotions running high and misunderstandings of the issue so prevalent, it's important to work through the process methodically and gain a clear understanding of what's at stake.
Lynn Jacobson, president of the Alberta Federation of Agriculture, is calling on the federal government to take more time to understand the tax reform implications for farmers. (CBC)

That includes looking at penalties for the many farmers who incorporate to access lower tax rates that allow them to re-invest in their operation, said Jacobson, pointing out that they are also subject to more risk and lack benefits.

"We want to make some tweaks," said Jacobson. "If the finance people agree this group is caught by unintended consequences ... they need to straighten that out so those rules and regulations that they're going to put in place don't affect people that they don't want to be affected."

Federal plans to stop business owners from paying family through a dividend could also hit farmers, said Jacobson.

Recently, representatives of the Canadian Federation of Agriculture recently met with Finance Canada, said Jacobson, and "there seems to be a willingness to tweak the system."

Appropriately compensated

In an email, Finance Canada spokesperson David Barnabe said the government is consulting on the proposed tax changes with farmers in different situations and has already made allowances.

"As to the anticipated impact the tax changes will have on farmers, the government will maintain the intergenerational rollover to the farmer's child and the lifetime capital gains exemption of one million dollars for farmers, which help to provide for intergenerational transfers," he wrote.

"Farmers and other small business owners can continue to have family members actively involved in, and appropriately compensated by the business," Barnabe added.