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Manitoba MP proposes tax reform to help family-owned farming, fishing and small businesses


A Prairie politician’s bid to make it easier to pass down the farm to the next generation could help East Coast fishing families.

Larry Maguire, Conservative MP for the Manitoba riding of Brandon-Souris, has proposed changes to the Income Tax Act to lessen the tax hit when farmers, fishers or owners of any small business sell to a family member.

Right now the tax rate is much lower if a business is sold to a stranger than a relative.

Maguire believes that’s unfair and last February introduced a private member’s motion — Bill C-208 — to the House of Commons to change it. The bill was reintroduced for second reading in the House of Commons on Feb. 3, where a 178-146 voted pushed it to committee. If it is supported there, it comes back for third reading and a final vote.

The Conservatives, Bloc Quebecois, NPD and Green Party gave full support to the Bill on second reading. Just two members of the Liberal government — Francis Drouin, of the Ontario riding of Glengarry-Prescott-Russell; and Scott Simms, from the Newfoundland and Labrador riding of Coast of Bays-Central-Notre Dame — voted in favour.


Selling a family business, like a fishing enterprise, to a family member is currently calculated under Canadian tax law as a Dividend for the seller, and a tax rate of almost 50 percent on the profit from the sale. - File photo
Selling a family business, like a fishing enterprise, to a family member is currently calculated under Canadian tax law as a Dividend for the seller, and a tax rate of almost 50 percent on the profit from the sale. - File photo


The Standing Committee on Finance, chaired by PEI MP Wayne Easter, began discussions on the proposal this week, when the committee met March 2.

Testifying before the committee, Maguire explained that when a family member sells a business to another family member, the difference between the sale price and the original price is considered a dividend.

However, if they sell the business to a stranger the sale price is considered a capital gain.

A capital gain is taxed at a lower rate, and under tax law the seller can use the lifetime capital gains tax exemption.

Taxes on a dividend are much higher, said Maguire, using the example of the sale of a farm worth $1 million.

Selling to a stranger would be considered a capital gain, and the farmer would pay tax of 13.39 per cent on any increase in the farm’s value since he first acquired it. If the farmer sold it to a child or grandchild the gain in value would be considered a dividend and taxed at a rate of 47.4 percent, Maguire said.

That, he said, makes it difficult to keep businesses under family ownership.

“It’s more financially advantageous for a family to sell their farm, fishing or small business to a complete stranger, rather than to their own family, their children or grandchildren,” said Maguire.

The idea of amending Income Tax Laws to benefit family-owned businesses is not new.

New Democratic Party MP Guy Carron introduced a motion on the matter in 2017.

Maguire noted the Carron’s bill had the full support of Opposition parties but, even though 10 Liberals voted in favour, it was defeated by the majority Liberal government.

Finance Committee chair Wayne Easter noted Carron compiled extensive research on the original bill.

Maguire used a lot of Carron’s research to reintroduce the Bill to Parliament, noting the NDP politician’s research was thorough and still holds up.

During the committee meeting this week Peter Fragiskatos, Liberal MP for the Ontario riding of London North Centre, asked Maguire how the changes proposed would affect government revenue.

Maguire said there are about 1.1 million small businesses in Canada and the amendment he is proposing would not create a great financial burden on Canada’s taxation system.

“The recommendations of the Parliamentary Budget officer were from $179-300 million . . . depending on the number of cases that are transferred in any given year,” he told the committee.

He said the cost depends on how many family businesses are sold to family members in any particular year.

According to Maguire, many organizations across Canada support the proposed amendments. He noted support for the Bill has come from the Milk Producers of Quebec, Chicken Farmers of Canada, Canadian Federation of Independent Business, the Canadian Federation of Agriculture, and the Taxpayers Federation of Canada, just to name a few.

The Finance Committee will continue to call witnesses.

Committee chair Easter said other witnesses— including the Life Underwriters of Canada and the Canadian Federation of Agriculture—will testify to the committee on March 9.


You can watch the full Standing Committee of Finance session from March 2 here:

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