Ottawa still considering eliminating deferred grain cash tickets

Alberta crop commissions say federal finance officials don’t understand the 
serious impact of eliminating the tax break

Ottawa is extending the public consultations on the “potential elimination” of deferred grain cash tickets by two months.

But Alberta farm leaders say federal finance officials have “little understanding” of the importance of the income tax break and “the far-reaching implications if farmers were to lose access to this tool.”

Kevin Auch.
photo: Supplied

“We believe that the government has overlooked the severe impact that farmers would face if this tool was no longer available,” Alberta Wheat Commission chair Kevin Auch said in a release from ‘Team Alberta’ (an alliance of the provincial wheat, barley, pulse, and canola commissions).

“Farmers operate with a high degree of income volatility due to factors beyond our control and the cash ticket deferral mechanism allows us to manage risk and balance our income to ensure we can still remain profitable.”

When listed grains (wheat, oats, barley, rye, flax, canola, rapeseed) are delivered for payment at a licensed elevator, an elevator operator can issue either a cash purchase ticket or a deferred cash purchase ticket, payable in the year following the year in which the grain is delivered.

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Under current tax law, a farmer who opts for a deferred cash purchase ticket is then able to include the amount of the ticket in taxable income in that following year.

The tax treatment of deferred cash purchase tickets “is a departure from the general rule with respect to taxpayers (including other farmers),” the government said after unexpectedly announcing in the March budget that the measure is under review.

In announcing the two-month extension of consultation period, the government said it’s committed to “building a fair tax system” which “includes recognizing that, over time, changes in the economy have made a number of provisions in Canada’s tax statutes less relevant than when they were first introduced.”

For that reason, the government is seeking public comment on the “ongoing utility, and potential elimination” of the income tax deferral available for farmers’ eligible cash purchase tickets.

During the extended consultation period, stakeholders are invited to comment on the income tax deferral, “including any appropriate transitional period or rules,” the government said.

Along with their letter to Finance Minister Bill Morneau, Team Alberta provided him with examples provided by Myers Norris Penny LLP which showed “the impact on farm businesses… can be significant.”

Greg Sears.
photo: File

“The existing policy allowing for deferral of cash tickets is an important tool in ensuring that farm operations, whatever their business structure, are treated fairly relative to other Canadian businesses,” said Alberta Canola chair Greg Sears.

The four crop commissions reject Ottawa’s argument that the “historical rationale” for deferred cash tickets related to “international grain shipment agreements and the Canadian Wheat Board’s former position as the sole purchaser” of Prairie wheat and export barley.

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