The federal government’s plans to increase capital gains tax rates within two weeks will result in a 30 per cent increase in taxes on the sale of a typical Canadian grain farm, according to a survey conducted by the Grain Growers of Canada (GGC).
The Grain Growers Association has written to Finance Minister Chrystia Freeland to launch a campaign to raise awareness of the bill’s impact on family farms across the country as long-awaited legislation to implement tax reform is introduced this week.
The proposal to increase the taxable portion of annual capital gains from 50% to 67% was first announced in April’s federal budget and is due to come into effect on June 25, even though the bill has yet to be approved by parliament.
“Our research shows that this typically translates into a 30 percent tax increase for grain farmers at the time of inheritance,” GGC executive director Kyle Larkin explains in the interview below.
For example, according to the GGC study, an 800-acre farm in Ontario that acquired its land in 1996 would pay an additional tax of $1.2 million, or 31 percent, if it sold at current land prices when the proposed changes take effect (using historical land prices from Farm Credit Canada’s database). A 2,500-acre farm in Alberta would face a similar increase, and a 4,000-acre farm in Saskatchewan would see its farm sale tax bill increase by more than $900,000. The numbers are similar in scenarios for a 3,000-acre farm in Manitoba and a 1,100-acre farm in Quebec.
Not only would the tax burden affect many farmers’ retirement savings, but passing some of the tax burden on to the next generation would make it more difficult for younger farmers to take over, Larkin said.
“The title of the 2024 Budget was ‘Fairness for Every Generation’ and what we told the government is that this will have the exact opposite impact on young farmers across Canada,” he says.
Grain growers, the Canadian Federation of Agriculture, the Canadian Canola Growers Association and many in the broader business and investment sectors have raised concerns about the changes over the past few weeks.
“Unfortunately, I don’t think they’re listening,” Larkin said. “That’s why we’re speaking out. We published our latest findings this morning, we put out a press release, and we’ll also be launching a website soon to encourage grain farmers and other farmers to write to their local legislators and sign a petition that we’re working on with our congressman. So there’s a lot more work to be done here.”
The GGC is specifically calling on the government to maintain the 50 per cent inclusion rate for intergenerational transfers already defined in the tax code following the passage of Senator Larry Maguire’s Bill C-208 in 2021.
“By adopting that definition and applying it to this capital gains tax rate change, the government can ensure that we protect family farms across Canada and really support the next generation of young farmers looking to take over,” Larkin says.
The CRA is expected to implement the changes on June 25, but with the House of Representatives due to adjourn next week, the actual bill likely won’t be passed before lawmakers return home for the summer recess.
“We have all summer to raise this issue and we will be speaking out on behalf of grain farmers and hope the government will change course,” Mr Larkin said.
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