The federal government's plan to raise the capital gains inclusion rate in less than two weeks will increase the tax bill on the sale of a typical Canadian grain farm by 30 per cent, based on research conducted by Grain Growers of Canada (GGC).

Grain Growers has written a letter to Finance Minister Chrystia Freeland and is launching a campaign to raise awareness about the impact of the bill on family farms across the country, coinciding with the introduction of the awaited legislation to implement the tax change this week.

The increase to the inclusion rate — or taxable portion — of annual capital gains from 50 per cent to 67 per cent was first announced in the federal budget in April, and is set to take effect June 25, even if the legislation has not received Parliamentary approval.

"Our research shows this will represent in general a 30 per cent tax increase on grain farmers at the time of succession," explains Kyle Larkin, GGC's executive director, in the interview above.

For example, GGC's research shows an 800acre farm in Ontario that acquired its land in 1996 would pay an extra $1.2 million or 31 per cent if selling at current land prices when the proposed changes take effect, using historical land prices from Farm Credit Canada's database. A 2,500acre farm in Alberta would face a similar increase, while a 4,000acre farm in Saskatchewan would face a morethan $900 thousand increase on its farm sale tax bill. The numbers are similar in scenarios for a 3,000acre farm in Manitoba and an 1,100acre farm in Quebec.

Not only will this tax burden affect many farmers' retirement savings, it will also make it more difficult for young farmers to take over if some of the tax cost is passed on to the next generation, notes Larkin.

"The title of Budget 2024 was 'Fairness for Every Generation.' What we've told the government is this is going to have the exact opposite impact on young farmers across Canada," he says.

Grain Growers and other farm groups, as well as many voices in the broader business and investment sectors, have raised concerns about the changes over the past few weeks.

"I think the unfortunate thing is they haven't listened," says Larkin. "So that's why we're getting loud. We've put out our most recent research this morning, we put out a press release this morning, and we also have a website coming soon, where we'll be driving grain farmers and other farmers to send a letter to their local MP, as well as sign a petition that we're putting together with with a Member of Parliament in the House of Commons. So there's a lot more work to be done here."

GGC is specifically asking the government to maintain the 50 per cent inclusion rate for intergenerational transfers, which are already defined in tax law after the passage of MP Larry Maguire's Bill C208 in 2021.

"The government can take that definition, throw it on this capital gains inclusion rate change and ensure that they can protect family farms across Canada, and ensure that they're really supporting that next generation of young farmers who are looking to take over," says Larkin.

While the CRA is expected to implement the change on June 25, the actual legislation will likely not pass before MPs head home for the summer, as the House of Commons is scheduled to rise next week.

"We'll have all summer long to raise this. We will be loud on behalf of grain farmers and hopeful that the government reverses course here," says Larkin.

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