Ten national agriculture and commodity associations have expressed concerns about the federal government’s planned blanket capital gains tax rate increase and related tax changes announced last month in Budget 2024.
Earlier this week, groups including the Canadian Federation of Agriculture, the Canadian Canola Growers, the Canadian Cattlemen’s Beef Association and the Canadian Grain Growers Association (all 10 groups, see below) sent a joint letter to the Ministers of Finance, Revenue and Agriculture and Agri-Food proposing several changes to the government’s plan to increase capital gains tax revenue.
These groups acknowledged the increase in the lifetime capital gains exemption (LCGE) to $1.25 million announced in the Budget, but are concerned that increasing capital gains tax rates from half to two-thirds will negate the increase in the lifetime exemption, undermining young farmers’ ability to purchase farm assets and hurting agricultural productivity. Bill C-208, which became law in 2021.
“Our concern is that increasing capital gains tax rates by two-thirds would negate the LCGE threshold increase, undermine the policy intent of Bill C-208, and jeopardize the success of a true intergenerational agricultural transfer to young farmers across Canada,” they wrote.
Asked at a meeting of the House of Commons Agriculture Committee on Thursday whether the agriculture sector had been consulted about the tax changes, Agriculture Minister Lawrence MacAulay admitted he was not aware that changes to capital gains tax were included in the budget.
“Did I know what was going to be in the budget before it was prepared? No,” the minister told the committee.
In a joint letter to Ministers Freeland, Bibeau and MacAulay, the farming organisations are calling on the government to take the following steps to alleviate their concerns:
– Postpone the effective implementation date of these measures (from 25 June 2024) until at least 1 January 2025 to allow for more detailed consultations with affected parties.
– The Canada Entrepreneurs Incentive (CEI), announced in the budget, will ensure that it includes not only first-generation farmers (i.e. start-up investors) but also subsequent generation farmers.
– All intergenerational agricultural transfers in Canada that are subject to Bill C-208 will continue to be subject to the previous one-half tax rate under the Income Tax Act.
– Capital gains that qualify for the lifetime capital gains exemption are excluded from the calculation of the alternative minimum tax (AMT) even if you don’t claim the exemption (e.g., if you use the entire exemption).
– The Canada Entrepreneur Incentive Program will not discriminate against businesses that employ diverse operating structures, such as holding companies, which have diverse business plans based on decades, if not years, of tax advice.
“We need to ensure that the proposed personal income tax measures announced in Budget 2024 do not jeopardise the wealth transfer from one generation of farmers to the next, but rather encourage the next generation of farmers to take up the mission, spur much-needed rural economic activity and help the agriculture sector reach its growth potential,” the letter said.
Signatories to the letter to Ministers Freeland, Bibeau and MacAulay:
– Canadian Federation of Agriculture
– Canadian Canola Growers Association
– Grain Growers of Canada
– Canadian Cattlemen’s Association
– National Cattlemen’s Association
– Canadian Seed Growers Association
– Canadian Fruit and Vegetable Growers Association
– Canadian Hatching Egg Producers
– Canadian Ornamental Horticultural Society, and
– Canadian Sugar Beet Growers Association
