CFA calls federal tax announcement a “step in the right direction”

The federal government’s announcement that it will reduce the small business tax rate over the next two years and cancel plans for new restrictions to lifetime capital gains exemptions is “a positive sign,” according to the president of the Canadian Federation of Agriculture.

Prime Minister Justin Trudeau, Finance Minister Bill Morneau and Small Business and Tourism Minister Bardish Chagger were in Stouffville, Ontario on Monday to announce the tax rate change, as well as plans for how they will follow through on the Liberals’ tax proposal as it applies to income splitting and capital gains exemptions.

“A reduced overall small business tax rate will help to drive growth in the agriculture sector and boost the competitiveness of Canadian farmers. As well, changes announced to ‘Tax Planning Using Private Corporations’ proposals are a positive sign that the government understands the concerns voiced by farm groups in recent months,” said CFA president Ron Bonnett, in a statement.


Monday’s announcements:

  • The federal government intends to lower the small business tax rate from 10.5 percent to 10 percent effective January 1, 2018, and 9 percent, January 1, 2019. This is the rate applied to a Canadian-controlled private corporation’s income, up to $500,000 (meaning the maximum savings will be $7,500.)
  • The government plans to move ahead with its proposed measures to restrict income splitting or ‘sprinkling.’ Only corporations with family members who “meaningfully contribute to the business” will be exempt from proposed changes. According to the government, approximately 50,000 family-owned private businesses (or 3 percent of CCPCs) use income sprinkling.
  • Proposed measures limiting access to the Lifetime Capital Gains Exemption will no longer be considered in the tax proposal.

While it’s expected the Liberals will make additional announcements to adjust their earlier tax change proposals in the next few days, some of the changes announced Monday are a “step in the right direction,” said Bonnett.

“Simplifying the income sprinkling rules is a step in the right direction and farmers look forward to more clarity around tax changes. CFA is also pleased that the government will not proceed with limiting access to the Lifetime Capital Gains Exemption,” he said. “Minister Morneau has said that he’ll ensure family farm transfers aren’t affected by the tax changes and farm groups await details on how the proposals will be revised in this regard.”

“While today’s news resolves some uncertainty, farmers remain apprehensive about other proposed tax measures, particularly on passive investments…CFA has also noted concern with plans that would affect the conversion of income into capital gains.”

 

RealAgriculture News Team

A team effort of RealAgriculture’s videographers and editorial staff to make sure that you have the latest in what is happening in agriculture.


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