A tax break for grain farmers that Ottawa is considering taking away is deserved and benefits the entire grain sector, says the chair of the Alberta Wheat Commission.
“I guess we are asking for special tax treatment but it’s because of our special circumstances,” said Kevin Auch.
Following its recent budget, the federal government said it is considering eliminating deferred cash purchase tickets as they are “a departure from the general rule with respect to taxpayers (including other farmers).”
When grains and oilseeds 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 following year. The deferred cash purchase ticket means the income isn’t claimed until the next year — a move that can save thousands of dollars for farmers who pay taxes as an individual (instead of through an incorporated farm business).
But it’s not a tax dodge — merely a reflection of the unique nature of grain farming, said Auch.
“Someone with a widget business in town doesn’t double their production one year and halve it the next — but we can’t control our production like someone making widgets,” he said.
“So we’ll get a great big crop one year and if I have a grain buyer phone me in December with a great price for grain that’s in the bin, I don’t want to have to say, ‘I’d love to but I don’t want to make my income too large this year and pay extra tax because next year might be a drought or whatever and I could be in a loss or have very little income.’”
The measure benefits the rest of the grain sector because if tax considerations force farmers to hold back grain when market opportunities arise, Canada will miss out on sales because of a lack of available inventory, said Auch.
“If you’re offered a premium for delivering before the end of year and you don’t have that deferred ticket option, then you have to weigh that premium against the extra taxes you’d pay,” he said. “So it can really restrict us on when we sell our grain.”
The federal government also said the “historical rationale” for the tax treatment of deferred cash purchase tickets “relates to international grain shipment agreements and the Canadian Wheat Board’s former position as the sole purchaser of listed grain in Manitoba, Saskatchewan and Alberta.” The end of the wheat board monopoly means grain delivery “is now the responsibility of private business rather than the federal government,” it said.
That’s “a red herring,” said Auch, as the measure also applied to grains and oilseeds not under wheat board control.
“This really has nothing to do with the free market. They may have used that as part of the rationale for allowing us to have it in the first place, but it’s never been just wheat sales that we were allowed to defer.”
A decision on the tax deferral won’t be made until after a “stakeholder” consultation, which runs until May 24. Alberta Wheat is preparing a submission and Auch said producers should send their comments to both Alberta Wheat (email government relations manager Erin Gowrilukat [email protected]) and federal officials (at [email protected]).
Ottawa needs to be reminded that “we’re different from other farmers and different from other industries and taxpayers,” he said.
Most wage earners receive the same pay every month, but every year is different for grain farmers, he said.
“If you push yourself up into a higher tax bracket one year, the next you might have a drought or an early frost. Like this year when guys have all this crop sitting out there. You might have a really good year the previous year and paid all this extra tax when you could have averaged it. It more correctly reflects what income you’re actually making.”
Alberta Agriculture has a backgrounder on year-end deferrals that includes deferred cash purchase tickets (as well as other types of deferrals). It can be found at www.agriculture.alberta.ca.
– With staff files