Good morning.
I'd like to thank the chairman and the committee for this opportunity to speak to you this morning. My name is Gordon Tait, and I'm a chartered accountant with Meyers Norris Penny.
I am here to address the circumstances of a small, highly productive, community-minded minority here in Canada known as Hutterites. Our firm represents over 300 of the 320 Hutterite colonies in Canada, and we have done so for over 45 years. We are here to ask for your support for amendments to section 143 of the Income Tax Act, which contains the provisions the Hutterite colonies are taxed under.
Specifically, we are asking that Hutterites, like other Canadian farms, be permitted to allocate a portion of their taxable income to members under the age of 18 who are actively involved in their business.
A Hutterite colony is a diversified grain and livestock operation. Colonies consist of 15 to 20 families and range in size from 60 to 150 people or more. As the colony grows in population, it will branch out or split, and it will purchase a new farm site and construct various agricultural and personal buildings and establish a new congregation. With the cost of approximately $15 million to $20 million for a new colony, we can be assured that any tax savings resulting from this request will be reinvested back into our rural economy.
There are approximately 30,000 Hutterites in the 320 colonies located across the west. The Hutterite religion is a Christian religion, and the members' fundamental belief is in the community of goods. The colony members share all things common, and they take a vow of poverty. Contrary to popular belief, Hutterite colonies are not self-sufficient. As does any other agricultural business, they require and purchase many goods and services in their local communities, including fertilizers, chemicals, feed, farm machinery and equipment, and vehicles.
Colonies are significant enterprises, with annual operating and capital expenditures of $3 million to $5 million per colony. That is about a $1.5 billion direct impact annually, likely helping to generate $7 billion to $10 billion in spinoffs. Colonies do not have a central buying group. They don't pool their resources or buy in mass quantities. Each colony operates quite independently and makes its own business decisions. There is no central pooling of financial resources.
Colonies play a very active role in their local communities. They support many charitable and community organizations with both their time and their finances. While significant in size as an agricultural operation, a colony supports 15 to 20 families. On a per capita or per family basis, colonies are quite small, with only 500 to 750 acres per family. They are a great example of a family farm, surviving and thriving because of their commitment to work and live together and to share.
Colonies are no different from any other farm or small business in Canada. Each member has responsibilities, and the young people are actively involved. Specific chores and responsibilities are assigned, and at the age of 15, Hutterites leave public school and begin their apprenticeship and training on a full-time basis.
The current income tax legislation regarding Hutterites puts restrictions on them that other Canadian farm businesses do not have. The legislation allocates the taxable income of the colony to specific individuals, but it does not allow an allocation to anyone who is under the age of 18. No other business is subject to an age restriction of any kind. They are restricted by the bounds of reasonableness.
Based upon the number of colony members under the age of 18 who are actively engaged in the farming enterprise, this restriction results in the loss of $22 million in non-refundable tax credits to Hutterites in Canada, which equates to a tax cost of $2.5 million per year. A Hutterite family will pay 45% to 50% more income tax than a non-Hutterite family. It is our submission that fairness and equity would be achieved if Hutterite colonies were permitted to allocate a reasonable amount of their taxable income to members under the age of 18.
We have had ongoing discussions with the office of the Minister of Finance and the Department of Finance, as well as several MPs, on this issue, and all of these discussions have been very positive and supportive. The changes that are being proposed represent a minor financial impact to the government but a significant amount to this small group of Canadians.
The history of section 143 goes back to the Carter commission of the 1960s, and this section has been updated only once or twice since then. We are not requesting anything special. We are looking to catch up with the rest of the act. It is with a focus on fairness and equity that we respectfully request this committee's support and recommendation that section 143 be amended.
I look forward to discussing this further or addressing any of your questions during question period.
Thank you.