Mar. 22, 2013, Ottawa, ON – The Canadian Federation of Agriculture (CFA) welcomed several measures in the federal budget tabled recently that will help to promote the growth of the agriculture industry, but have concerns around taxation barriers to young and small-scale farmers.
“Overall, we are pleased to see Budget 2013 outline several important contributions essential to the growth of the sector – reaffirmation of the $3 billion in funding for Growing Forward 2 programs and investments in research and innovation, in particular,” said CFA president Ron Bonnett.
“However, CFA and its members have concerns around taxation barriers to new entrants in agriculture and small-scale farmers. As agriculture is the sector facing the largest number of impending retirees in the next 10 years, we had hoped the measures would have gone further in addressing this,” Bonnett remarked.
The budget covers various areas that affect agriculture, including:
CFA was pleased to see the increase of $50,000 to the Lifetime Capital Gains Exemption – an important tool for helping farmers manage the tax burden associated with the transfer of farm assets. Although this is a minor increase, the resulting positive change is that it will be indexed with inflation, allowing the exemption to keep up with increasing real costs.
A major barrier for attracting new entrants to agriculture is Section 31 – Restricted Farm Losses – of the Income Tax Act. This section of the act outlines circumstances under which a farmer’s ability to claim farm losses will be restricted to $8,750, when a farmer also has incoming off-farm income. The budget tabled indicated an increase to $17,500. The inability to claim more than $8,750 of farming losses was an unmanageable barrier for new entrants facing high farmland values and farming’s increasing capital costs. The increase outlined in the budget will only slightly improve the situation. The CFA has recommended the restriction increase to a more realistic $40,000 for new entrants to agriculture.
The CFA is disappointed with the reinterpretation of this section, requiring that off-farm income be a subordinate source to farm income. For the majority of new entrants to the industry and small-scale farmers, off-farm income represents a critical support in funding start-up costs, making farm expansions, and simply maintaining the viability of many of Canada’s family farms. This reinterpretation may prevent these farmers from being able to claim more than $17,500 in losses, and may pose a challenge to entering or staying in the industry.
The government is increasing its investment in Genome Canada, which will support agricultural innovation and research. The CFA has been advocating the importance of investment in basic public research, so this is a well-received measure with industry. Considering the domestic and global challenges with climate change and doubling food production for an increasing population, basic research into plant breeds is a priority, and CFA is pleased to see this recognized and supported by the government.
The government is contributing significant funding to infrastructure, which, once implemented, will see significant benefits to rural communities. This should result in positive benefits for farmers through much needed maintenance, repair, and upgrading of Canada’s rural infrastructure, specifically linked to transportation and accessibility to markets.
The CFA is pleased to see continued support for Beyond the Border and work under the Regulatory Cooperation Council, reducing barriers to trade between Canada and the U.S. through harmonization.
The CFA also welcomes the government’s continued focus on a globally competitive business environment.
The budget provides tax incentives for clean energy generation equipment and a significant allocation of funds to Sustainable Development Technology Canada for the development and implementation of new, clean technologies. The CFA is pleased to see the continued support for clean energy technologies, and hopes it is structured in a way that allows Canada’s farmers to take advantage of the benefits in a timely fashion.
“We firmly believe retaining agriculture as a viable business must be priority if we want to maintain a Canadian food supply. We look forward to working with the government to maximize the potential of the sector and to flesh out the positive steps this budget has taken for research and innovation,| concluded Bonnett.
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