National organizations representing Canadian farmers and ranchers are calling on the federal government to reverse its decision to administer changes to the capital gains tax that were announced in the federal budget last year.
The Canadian Canola Growers Association, Canadian Cattle Association, and Grain Growers of Canada issued a statement last week to say the increase to the capital gains inclusion rate should not be implemented without approval from Parliament. The Canadian Federation of Agriculture sent a separate letter to Finance Minister Dominic Leblanc this week echoing the national commodity groups’ message.
Former finance minister Chrystia Freeland tabled a Notice of Ways and Means Motion (NWMM) last year signalling intent to make legislative changes, but the bill to amend the Income Tax Act and related regulations was not introduced in the House of Commons before Parliament was prorogued earlier this month.
It’s very unlikely the legislative changes will pass before an upcoming federal election, but the Canada Revenue Agency (CRA) implemented the tax change in June 2024 and has chosen to leave it in place based on the Notice of Ways and Means Motion.
As a result, taxpayers now have to choose whether to pay capital gains taxes based on the higher inclusion rate now and try to recoup overpayments when the policy officially dies, or ignore the CRA’s tax change and risk penalties.
“We urge the CRA to pause the implementation of the NWMM and reinstate the previous rules on capital gains and inclusion rates. This will provide much-needed stability and clarity for farmers while allowing for proper parliamentary review and consultation,” says CFA’s letter, signed by president Keith Currie.
The farm groups note the average age of Canadian farmers is over 55 years old, meaning tens of billions of dollars in farm assets are set to change hands, and be subject to capital gains taxes, over the next decade.
“We continue to express opposition to the accelerated pace of implementation, the lack of consultation in the lead-up to these proposals, and the changes that undermine the policy intent of Bill C-208, particularly in terms of the continued uncertainty regarding future treatment of capital gains that adds costs, complexity, and delays for farmers trying to navigate the intergenerational transfer of farm assets,” said the CCGA, CCA, and GGC.
The increase to the inclusion rate from 50 per cent to 67 per cent was accompanied by an increase to the lifetime capital gains exemption for producers, but farm groups say this does not address the broader challenges created by the inclusion rate increase.
Opposition Conservatives say they will reverse the changes if they form government. Leader Pierre Poilievre has been highly critical of the inclusion rate increase. It’s not clear whether they would also reverse the increase to the lifetime capital gains exemption.
Editor’s note: This article was updated to add reference to the Canadian Federation of Agriculture’s letter to Dominic Leblanc.