By Jamie Rieger
Federal Finance minister Bill Morneau has been receiving a lot of heat in recent weeks over the proposed changes to Canada’s tax laws that he announced on July 18, changes that could ultimately have severe negative impacts on incorporated family farms and small business.
Three specific changes to income splitting/income sprinkling, retaining passive investments, and limiting the conversion of a corporation’s business income into capital gains have tax specialists holding seminars, webinars, and meeting with their clients over what may be coming down the pipe
“Currently, there is a lot of speculation about this, even to us. We don’t even have a draft yet,” Melanie Harty, a partner with Burns Valkenburg and Associates said last week. “There are a few things here that are of concern to the farmers.”
One of the gray areas in the proposed change is the reasonableness test.
“What is reasonable? And what if they disagree? What type of test is going to fit here?” said Harty. “To me, there is nothing black and white here, but there are lots of gray areas. When they are stating that reasonableness applies to somebody in the family helping on the farm, what does that mean? The wife runs in for parts, takes meals out to the field, and does many other tasks while her husband is in the field, is that going to be enough?”
“The family trust used to get used to protect … Now, they are talking about taking that away. The biggest kicker is now the farmer has to revisit his original tax plan. This is all very drastic,” said Harty. “We have been doing webinars and this is all very scary. Will it restrict how money flows out? If the kids are home for the summer and working on the farm, what kind of onus is this going to put on the parents who are paying for their education and paying them to work the summer?”
The timing of the announcement also has the tax specialists shaking their heads.
“The is really bad timing for our farmers who are trying to get their crops off right now, so it really makes you question their (federal Finance Department) timing. It seems they are trying to rush this through as quickly as possible,” said Harty. “It’s got us all baffled. And really, at this point, the only thing we can do is squawk. We all have more questions than answers.
Dale Thacker is one of the many farmers who is in the midst of harvest.
“I know this is something I should have done already, but we are in the middle of harvest here, and to be honest, I have not had the time to do it yet,” he said.
Glen Motz, Member of Parliament for the Medicine Hat-Cardston-Warner said people need to contact the Prime Minister’s Office and that of the Finance Minister prior to the Oct. 2 deadline for feedback.
“People need to contact the Minister of Finance. He’s the one who has done this. And, they need to contact the Prime Minister’s Office and vehemently voice their opposition to these changes,” said Motz. “All Canadians believe the tax system should be fair. They are attacking the very Canadians they say they want to protect. These tax changes would discourage business start-ups, businesses will reduce their hours, and it will make our businesses less competitive. This is just another Liberal tax grab. “I spoke to a farmer who told me it would be easier for him to sell to a third party than to transfer the farm to a family member.”
“I am shocked by this. They’ve put out these proposals and people have until Oct. 2 to respond, but they are hoping people are too busy to see it,”
As a result of the feedback received by federal Liberal politicians since the announcement for the proposed tax changes was made on July 18, the issue will be a hot item on the agenda at the caucus retreat taking place in Kelowna this week.
Department of Finance Canada said the closing date for submitting comments about the proposed tax changes is Oct. 2 and those wishing to submit a comment can send them to: firstname.lastname@example.org.
Rt. Hon. Justin Trudeau
Office of the Prime Minister
80 Wellington Street
Ottawa, ON K1A 0A2
Minister of Finance
The Honourable William Francis Morneau
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario K1A 0G5