Federal budget features restraint and modest tax incentives

Friday, March 22, 2013

by SUSAN MANN

Almost 70 per cent of Canadian farmers are poised to retire in the next 10 years, so the federal government’s increase to the lifetime capital gains exemption is a very important tax measure for them, says a spokesperson for the Canadian Federation of Independent Business.

Federal Finance Minister Jim Flaherty announced the lifetime exemption during his 2013 budget speech Thursday afternoon in Ottawa. In 2014, the exemption will rise to $800,000 from $750,000. As well, the new limit is being indexed to inflation.

“Very few farmers and small business owners have a pension,” says Marilyn Braun-Pollon, federation vice-president of Prairies and agri-business. “Instead they rely on the value of their business to fund their retirement. We’re pleased that we have seen progress on this issue today.” She says the last time the lifetime exemption was increased was in 2007; before that it hadn’t been increased for 20 years.

The federal government will spend $110 million over five years to increase the exemption and index it to inflation.

Braun-Pollon says a survey of the federation’s agri-business members found that 94 per cent of the respondents indicated indexing the exemption to inflation would have a positive impact on their business.

An extension and expansion of the employment insurance hiring credit for one year is another big gain, she says. “There’s no single silver bullet solution but we’ve always said governments need to play a role to ensure their policies facilitate an accessible workforce.”

Braun-Pollon says the federation is pleased the budget includes a focus on skills training referring to the introduction of a Canada Job Grant program that could provide $15,000 or more per person to ensure Canadians get the skills employers want. The federal government, provinces/territories and employers will chip in equal portions of the training grant.

Braun-Pollon says the federation will lobby to ensure the grant “recognizes informal, on-the-job training.”

Another positive part of the budget that Braun-Pollon says farmers will like is the government’s continued focus on eliminating the deficit by 2015. The current 2012/13 deficit is $25.9 billion and that will go down to $18.7 billion by 2013/14 and to $6.6 billion for 2014/15. “Then we’ll hit a surplus of $800 million in 2015/16. That’s particularly important because we all know that today’s deficits are tomorrows taxes,” she notes.

Flaherty says the budget is an intentional and deliberate low-tax plan to control spending and keep the government on track to balance the budget by 2015. The plan has the smallest increase in discretionary spending in nearly 20 years, he says.

Braun-Pollon says for farmers who are incorporated there’s a reference in the budget to look at lowering taxes further on the small business tax rate once the budget is balanced.

One interesting tax change for part-time farmers is an increase on the amount of losses that can be applied against income from other non-farming sources. The limits have been increased to $17,500 from $8,750 for the first time in 20 years, she says.

But Canadian Federation of Agriculture president Ron Bonnett says there’s some concern that an interpretation of what a restricted farm loss is might eliminate a number of farms. “That could be a concern for start-up farmers.”

Bonnett says they’re still trying to get the details on what interpretation is being used. “The increase is something we wanted to see but just how it’s interpreted we have to make sure that’s right as well.”

Ontario Federation of Agriculture president Mark Wales says the increased amount on farm losses that can be applied to non-farm income is a good start but the $17,500 figure isn’t enough. In addition, the loss amount should be indexed to inflation. “That’s a very important feature to young and beginning farmers who have an off-farm job and they’re trying to farm.”

For infrastructure, Flaherty announced the new Building Canada Plan to fund infrastructure projects, such as bridges, roads, public transit and other projects.

Wales says one of the major requests the federation had in the provincial pre-budget consultations is more money for municipal infrastructure so “anything at either level, federal or provincial governments, that puts more money into municipal infrastructure is good.”

Bonnett says the infrastructure funding could be huge for farmers. “With escalating farmland values, what we’re seeing is farmers are picking up more of the share of the tax burden at the municipal level. Getting this extra funding will help build the roads and bridges they need to haul their product in and out of their farms.” BF