At the annual conference of Federal, Provincial, Territorial (FPT) Ministers of Agriculture in Whitehorse, Yukon in July, the Ministers of Saskatchewan, Alberta, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Manitoba expressed serious concerns about changes to the capital gains tax proposed in the 2024 federal budget and the impacts they will have on the agricultural sector

The changes to the capital gains tax was not a topic on the agenda of the annual meeting of FPT Ministers of Agriculture. Provinces raised this important topic during roundtable discussions, and noted that these changes will inadvertently, disproportionately and unfairly target producers and their succession plans. 

“Agriculture is the backbone of our economy,” Saskatchewan Minister of Agriculture David Marit said. “We must work with our producers, ensuring their success and the proposed changes to capital gains taxes will make it harder for us to do just that. It is our position that the federal government reverse this harmful policy and work with producers and provinces to keep our agriculture sector strong and vibrant.”

 

 “Long-time producers should be able to retire knowing that their children have the opportunity of becoming the young farmers that will feed the next generation of Canadians”

 

“The proposed changes to the capital gains tax are deeply concerning for Alberta’s agricultural community,” Alberta’s Minister of Agriculture and Irrigation RJ Sigurdson said.  “These changes will unfairly burden our farmers and ranchers, who are already facing significant challenges. The federal government must reconsider these measures as they threaten the long-term viability of Canada’s agricultural sector and the livelihoods of those who depend on it.”

“The Ontario approach has always been to reduce taxes and red tape for farmers, agricultural employers, and agribusiness stakeholders,” Ontario’s Minister of Agriculture, Food and Agribusiness Rob Flack said. “Raising capital gains taxes at a time when so many farmers are approaching retirement and managing farm succession planning is a serious mistake and our government opposes it unequivocally.”

Intergenerational transfers play an integral part in succession planning for family farms. Increasing inclusion rates from one-half to two-thirds for individual capital gains above $250,000, and from one-half to two-thirds for corporations, will penalize farming operation transfers. Farmers and ranchers who rely on selling their assets for retirement will also see their retirement plans diminished.

The changes to the capital gains tax will jeopardize the long-term viability of family farms who are unable to keep pace with federal tax measures, in addition to other increasing costs associated with the farming industry. Putting these critical farming businesses at risk will have wide ranging implications to Canadian food security, rural communities, and the Canadian economy. In the long-term, these impacts may be greater than the federal government’s anticipated revenue generated by these tax measures.

A recent study from the Royal Bank of Canada suggests that 40 per cent of farm operators will retire by 2030. This highlights a looming trend of intergenerational farm transfers, and therefore the importance of farmers being able to have good succession planning in place. Governments should be making it easier, not harder for intergenerational transfers in the agricultural sector.

“The New Brunswick government has always been supportive in providing resources for farmers to assist with succession planning,” New Brunswick’s Agriculture, Aquaculture and Fisheries Minister Margaret Johnson said. “At a time when the average age of farmers is 57, we must provide policies which encourage our young people to engage in the sector. We must make farming more enticing and eliminate the obstacles impeding entry by supporting the succession of farmers.”

“Island farmers like their colleagues across the country have worked tirelessly to produce top quality food feeding the nation and the world,” PEI Minister of Agriculture Bloyce Thompson said, “A driving force for most farmers is to provide an opportunity for the next generation to carry on the family tradition. Changing the capital gains structure will harm the farming industry by stripping value from the family farm through increased taxation. Now is the time we should be investing in our agricultural industry and make it easier to farm. The changes to the taxation of capital gains adds to their burden and should be reconsidered.”

“Everyone can agree that local food production and food security are vitally important,” Nova Scotia’s Agriculture Minister Greg Morrow said. “With an aging agricultural workforce, now is the time to encourage young people who are interested in farming and food production. The federal government’s proposed capital gains tax could have a significant impact on farms and farmers and their succession plans.” 

“Manitoba stands with producers who are especially being hit hard by these changes to the Capital Gains Tax,” Manitoba’s Agriculture Minister Ron Kostyshyn said. “After years of succession planning, long-time producers should be able to retire knowing that their children have the opportunity of becoming the young farmers that will feed the next generation of Canadians. Manitoba has gone to great lengths to reduce costs for producers, including lowering the cost of crown lands and freezing the provincial gas tax, and this change will only increase costs for producers who are already facing enormous challenges.”

Without fully assessing how the changes to the capital gains tax will impact this major demographic shift, it is impossible to know how large an impact this will have on a vital industry. Moreover, the pace at which these changes will be implemented, let alone the lack of consultation, provides little time or opportunity for farmers to decide how to adjust their approach to succession planning.

Ministers urged the federal minister to make agriculture a priority around the federal Cabinet table, and ask that the proposed changes to the capital gains tax impacting the broader agriculture and food industry be immediately reversed.