Editor’s note: This letter to Finance Minister Bill Morneau was submitted to RealAgriculture by Stewart Skinner, a young pig farmer from Listowel, Ontario, who voted Liberal in the 2015 federal election. He was also the Liberal candidate for Perth-Wellington in the 2014 Ontario election. Skinner posts periodically on his Modern Farmer blog. October 2nd is the last day to submit comments to the federal government on the proposed tax changes.
CFO, Imani Farms Ltd
Minister of Finance
Hon. William F. Morneau
Department of Finance Canada
90 Elgin Street
cc: MP for Perth Wellington
564 Wellington Building
House of Commons
Dear Mr. Morneau,
Canadian tax code is incredibly complex and hard to understand for everyday Canadians. I have reached out to the professionals at BDO and Ward & Uptigrove that our family works with to operate a successful farm business and who we have trusted to guide us through inter-generational transfers. Both firms have participated in the consultation process with your ministry. Their submissions are detailed and speak to the majority of all changes contained within the draft legislation. I do not wish to duplicate their efforts and instead of focusing on specific components of the draft legislation, I wish to focus on the contributions that my partner, my Mum, and my siblings have made to our businesses. They will be impacted most if the changes proceed as presented and it is my hope that government MPs and Ministers will stop describing us as tax cheats and celebrate that we are a family unit that contributes in a myriad of different ways to carry on the legacy of farming our ancestors have built for us here in Canada.
The draft legislation released on July 18th, 2017 represents the largest overhaul of Canadian tax legislation since 1971. Components of the 1971 legislation were guided by the Carter Commission, a four-year intensive study initiated by Prime Minister John Diefenbaker , which resulted in a six-volume tome on how to build a fairer tax system in Canada. One such component was integration, the idea that ‘a buck is a buck’ regardless of whether it is earned personally or by a corporation. The intention of integration is to make tax system fairer, however many of the issues that the proposed legislation is trying to correct have arisen because the government of the day failed heed the commission’s advice on another key recommendation. The Carter Commission strongly advised that the new code should use the family household as the primary taxation unit. The report stated, “We believe firmly that the family is today, as it has been for many centuries, the basic economic unit in society.” The failure to couple a family taxation unit with integration has bred a system ripe for interpretation and alteration.
My partner Jessica and I founded Imani Farms in 2015 after purchasing a portion of Stonaleen Farms from my parents. Since inception, our farm has undergone rapid growth, transforming from a 350 sow weaner pig supplier with under $500,000 in sales to a diversified farming operation that grows pork for both niche and commodity markets. In 2018, we will sell over 25,000 pigs and sales will exceed $3,500,000. Currently Imani Farms supports approximately 15 full time equivalent (FTE) jobs and growth next year will create a further 5 FTE. This growth would not be possible if it were not for Jessica working off farm full time. Jessica’s job ensures that our basic needs are met and it has allowed our business to reinvest in growth in lieu of paying me a salary. Jessica and I work as a team, we share the risk of our operation, our dreams for the future are shared, and the everyday stressors impact us equally regardless of who is in the barn and who is working off farm. In my eyes, her contribution is every bit as important as mine. Does she not deserve to share in the benefits and have the same privileges as I, the ‘full-time’ farmer? I share the values of gender equality that our Prime Minister speaks about often. Dismissing the contribution that Jessica makes to our business and insinuating that she is a ‘tax-cheat’ for being recompensed for the risks she has taken is a stark departure from message for a government that has claimed loudly to be for fairness for all.
The Canadian hog industry is a cyclical commodity industry no different than our friends in sectors like mining or forestry. Canadian producers compete in a cut-throat global industry and in my lifetime my family has experienced the pain of not knowing if our business will survive through the next downturn. The period from 2007-2013 was an extended period of depressed hog prices, high feed prices, and a strong Canadian dollar. During that time, over 30% of our colleagues in the hog industry left the business and my parents saw their net worth decrease by hundreds of thousands. My Mum, Nancy worked as a school teacher and it was only because of her paycheque that our family could even continue farming during that time period. Jessica’s job has fueled growth at Imani Farms but Mum’s job ensured the very survival of the family farm. Without her contribution, Jessica and I never would have had the opportunity to start Imani Farms. As presented, the draft legislation indicates that Mum would no longer be eligible for Capital Gains Exceptions because she was not ‘active’ in the operation of the business. How is it reasonable to diminish the contributions of my Mum when without her, everything would be gone? To do so again cuts against the core value of fairness that I supported when I voted Liberal in the previous election.
Finally, I speak to contributions that will never show up on a ledger or T4 slip. My sister Kathleen was only 13 at the onset of the aforementioned downturn in the hog industry. She was not working in the barn nor was she working off farm. The draft legislation would indicate that she wasn’t contributing at all to the business. Can you place a value on the restorative happiness she brought my Dad, whose confidence as an entrepreneur was being tested by losing thousands of dollars a week, by playing the piano and singing to him after a long day in the barn? What about my brother, who could have us falling down laughing with a Monty Python impression, giving our minds a much needed break from fretting about how to pay the feed bill next month? There is no way to quantify these contributions to a CRA auditor, however to ignore the impact they have on a family business is to be tone deaf to what makes a family business work.
Minister Morneau, on September 21st, 2017 you wrote in the Western Producer that “Family farms where people do legitimate work will not be affected by our proposals.” Defining ‘legitimate work’ in a family business is complicated because in my eyes, all of the examples above, from Jess commuting every day to her job to my sister playing the piano for my Dad are legitimate contributions to our family businesses. They are legitimate because without them, the business may not exist today.
I would encourage you to stop listening to political operatives trying to score cheap points on tax policy. In our polarized electorate, it has become easier to blow a dog whistle than craft good policy. This draft legislation isn’t worried about revenue, it is all about politics. The Prime Minister himself has stated publicly that these changes are about fairness, not revenue. If your government is serious about reforming tax code it deserves the same level of consultation that the Conservative and Liberal governments of the 1960s and 70s afforded it. If you are focused on fairness for the middle class, revisit the Carter Commission and start an exhaustive consultation process that updates our tax code for the realities of our contemporary times. Entertain and debate ideas like universal basic income, flat income tax rates, increased consumption-based taxation, and using the household as the primary taxation unit. It is time for the Liberal government to cease virtue signalling, roll up their sleeves, and finally deliver on their 2015 promise of Real Change for Canadians.
Chief Farming Officer
Imani Farms Ltd