Bill C-661 (Historical)

Facilitating the Transfer of Family Farm or Fishing Corporations Act

An Act to amend the Income Tax Act (transfer of family farm or fishing corporation)

This enactment amends the Income Tax Act in order to provide that, in the case of the shares of the capital stock of a family farm or fishing corporation, siblings are deemed not to be operating at arm’s length and to be related.

Facilitating the Transfer of Family Farm or Fishing Corporations Act

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Mr. Speaker, I am glad to rise today to speak on Bill C-661, introduced by the member for Joliette.

I must first state that the Conservatives were speaking about how much they were supporting agriculture, but what we have seen over the last few months is pretty bad.

Two things that they have done are pretty bad. First, we have seen members from that party speaking against supply management, which is one of the pillars for agriculture in this country. Second, there are big cuts in the budget to business risk management, the tools that farmers need when they have bad years. That has been cut by hundreds of millions of dollars. It is very disappointing to see the Conservative government do that.

In speaking on this bill, I will be basing my remarks on my personal experience as a farmer and on the importance of maintaining family businesses. In the context of this bill, the main objective is to treat siblings like any other family members by exempting them from the anti-tax avoidance measures by amending the Income Tax Act. We are supporting that.

The reality is that even if farmers have the opportunity to give part of their farm value to their children or grandchildren without income tax consequences under the Income Tax Act of Canada, they still need to maintain sufficient investment income to ensure a healthy retirement. This is also necessary if a farmer wants to provide for their other children who are not actively involved in the operation, and the same goes for fishing families on the east coast, the west coast, and in central Canada.

Even though Canadian agriculture has changed so much, the family business is the cornerstone of the industry. Canada's agri-food sector accounts for 7% of Canada's GDP and over two million jobs. That is one job in eight. While primary agriculture accounts for a small share of the total economy, about 2%, it is at the heart of the agriculture and agri-food system and has grown over 1.5% per year since 1997.

Agriculture and fishing have drastically changed, and we need to make sure that legislation governing these industries is able to keep up with the rapid pace. In 1991, there were 280,000 farms in Canada. In 2011, that number had fallen to 206,000. However, the average size of Canadian farms has grown tremendously, from an average of 200 acres to 800 acres. In that same time period, the average age of a Canadian farm operator has risen quite dramatically, going from 48 years of age to 54. It varies across the country, but that is the average.

Urbanization, an aging population, globalization of the economy, and consolidation throughout the agri-food chain have brought fundamental structural changes at the farm level. More specifically, the need to develop new markets and to comply with consumer demands has required an adaptation of production structure and practices within the agriculture sector. Although this adaptation creates new opportunities, it poses many challenges to our young farmers and fishers.

Over the next decade, we are going to be seeing a lot of these family businesses being passed down from one generation to the next. Given the extremely harsh economic context, this bill being debated today is crucial to helping ease those transfers to other family members. Between 1991 and 2011, the number of farmers under the age of 55 fell 42%, from 265,000 to 150,000. In that time, the number of older operators increased, as I said before.

Quite simply, the Canadian farming and fishing population is aging. That does not mean there are not a lot of young people who want to get into it, but the road map there is very difficult. There are now fewer and fewer young people to replace these retiring farmers and fishers. This situation is worrisome, as young farmers guarantee the future of agriculture and play a key role in rural economic development. Many other activities in rural communities depend on the agricultural sector, including fishing, milling, hardware, processing products, and even transporting. Many of the people we see driving down the highways every day are people involved in the whole agri-food sector.

The federal government has an important obligation to improve its programs and policies to keep young farmers in the industry. By supporting the bill, we are trying to ensure that the Income Tax Act does not discourage the best-qualified person in the family from taking over the business because of tax implications.

Agriculture is more and more capital intensive. Producers have to invest in buildings, machinery, and other equipment to become more efficient and to satisfy consumer demand for low produce prices. We also see many times that in many farming operations it is not just for maintaining prices but is for food safety.

I have been travelling across the country visiting farms over the last year. It is amazing how modern these farms are, how they have HAACP in place and cleanliness and tracking of everything they are doing on the farm. This all costs money.

Market conditions also contribute to increasing the value of assets, such as land and quotas. This can cause some challenges for young farmers, as the rise in asset values are not always covered by sufficient income. It is one of the lowest returns when we look at the amount of capital spent on a farm. Many times these young farmers are operating an enterprise to put food on the table with a fairly low return.

Some agriculture sectors are doing a little better, especially with supply management, which the Liberals brought in many years ago and which we are going to stand behind 150%.

Thanks to the supply management policy governing agriculture production in Canada, farmers enjoy an environment of stable and predictable milk prices and poultry prices with the formula they have in place. The supply-managed industries collectively generate $25 billion in GDP, $5 billion in tax revenues, and over 300,000 jobs. That is just in supply management alone.

Despite these favourable conditions, under this system intergenerational transfer is difficult. When there is a need to plan for succession, numerous cases have been reported of farmers not being able to find the right arrangement to meet the expectations of the exiting farmers or of the new entrants.

I think if there was a return, a lot of people would probably think it was a good occupation and an interesting occupation and would be inclined to pursue it.

The best way to keep young farmers in the industry is to make it profitable. Farming is a lifestyle, not just an occupation, but at the end of the day, farmers still need to make money. We do not expect our health professionals and many other people in our society to work for free, and we cannot expect the producers of our food to do so either. Young farmers are not going to invest millions of dollars in something if they do not know if it is going to produce a return. Supply management provides that to them and gives them stability. As I mentioned before, business risk management is very important.

I think we can all agree that there seems to be a growing disconnect between the general population and agriculture.

Young farmers also know perfectly well that agriculture faces numerous challenges related to the increasing cost of products, as I mentioned before, reduced margins, trade and marketing issues, et cetera.

I commend groups such as the Canadian Young Farmers' Forum and the Canadian 4-H Council for their efforts to educate, energize, and empower the next generation of Canadian farmers and agriculture leaders. However, these groups need a comprehensive federal policy targeting young or new farmers to make it feasible.

That is not to say that this shift in the agricultural sector should diminish the importance of maintaining smaller operations. There are also many small successful farms, and the government should be doing more to help those operations as well. Small operations as well as big ones can contribute and can work together.

I am very much in favour of the motion. It would be another tool in the tool box to help farmers get through. For those farmers who work so hard and put so much into their farms, many of them 60 and 70 years old, the only return they can get will be through the implementation of this bill.

This is the last half a minute of what is probably my last speech in the House. I am glad I am doing it on agriculture. I am a farmer from Cape Breton, and our family has a farming business.

I would like to thank all my colleagues, and I wish them well through the summer and in their future endeavours. I thank all the staff here who have done so much for us and have kept the place going, the staff in our whip's office, who keep us here all the time, and of course, my colleagues here tonight who stayed with us for the last shift.

Thank you very much, Mr. Speaker, for this opportunity.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, I am very pleased to speak in support of the bill introduced by my colleague from Joliette. I want to commend her on this excellent initiative and on all the good work she has done over the past four years. I really enjoyed working with her and I thank her. I also thank her for truly being a strong voice for farmers in Quebec and for standing up for our regions. I am proud not only to support this bill, but also to have worked with her.

The NDP believes that it is important to support our family farms in Quebec and Canada given that we recognize how important they are to our regions and to the Canadian economy as a whole. Bill C-661 is a step in the right direction for family farms. It makes a small change to the Income Tax Act. It is a small change, but a logical one that will have a big impact. This change is needed to remedy a situation that can create serious problems for farmers. Transfers of family farms are often very complicated. I doubt that any MP in this House believes that that is good for the economy. We want to make it easier for farmers to get down to work, pursue their passion and be able to transfer these farms to family members who want to take them over. We want to ensure that they put all their time, money and energy into this very important work.

Under existing laws, brothers and sisters are not considered to be family and are therefore penalized if they want to buy, sell or transfer land to each other. This can make it even more difficult for them to manage their family farm, especially when they are looking for someone to take over, which may sometimes be a brother or sister. This makes the situation more difficult. We all know that farmers need a government they can count on to make these transfers easier so that they can get back to their work, which is so important to our economy and to all Canadians. We want to be able to eat food grown in Quebec and to take advantage of it.

In my riding of Argenteuil—Papineau—Mirabel, agriculture is an extremely important part of the economy. There is a huge amount of diversity in the agriculture, in the type of agriculture and in the changes taking place across my riding, whether it is in Argenteuil, Papineau, Mirabel, the Deux-Montagnes region or even Les Pays-d'en-Haut. It is incredible to see all of the microclimates that exist. This means that different crops can be grown in these locations. It is very important to note that families put their hearts and souls into their passion in order to be able to feed Canadians and Quebeckers. Agriculture is therefore an important economic reality in the region. They are all family farms. Eastern Canada is at a real risk of losing its family farms. We must do everything we can to reverse that trend. Since the Conservatives came to power, thousands of family farms have had to shut down. That is unacceptable. This government has not been able to protect struggling local communities and farmers.

We must also realize that when the agricultural sector is under pressure, the whole rural community feels the effects. We are referring to all the people who make their seasonal contributions and all the small businesses that depend on farmers' investments. Therefore it is very important to ensure stability and investment in this industry. A small change like this will have a huge impact because, as I said, it will eliminate a lot of stress and problems surrounding transfers, rather than creating more paperwork and wasting time, energy and money. We truly must encourage the new generation.

Let us remember a few facts. Canada once had a world-class agricultural infrastructure, and family farms and rural communities were the heart and soul of the industry. Today, however, Canadian agriculture faces the problem of land takeovers, with farmland being purchased and concentrated in the hands of huge businesses. The family farm and the small agricultural business are definitely endangered.

In order to combat this phenomenon and the decrease in the number of farm owners in Canada, the NDP knows that we must lend a hand to family farms and facilitate the transfer of assets between family members.

We simply want to make it possible to recognize the family ties between brothers and sisters in an agricultural operation, in order to make intergenerational transfers and division of assets more flexible and encourage new blood, a new generation of farmers who will be able to carry the torch and invest in their business as their family has done.

I wish to reiterate my wholehearted support for this bill, and I thank my colleague for introducing it. It is extremely important that we have a chance to debate it, and I am pleased we are able to do that this evening.

Since we are at second reading, I hope we will be able to pass this bill, because this is important legislation. My constituents in Argenteuil—Papineau—Mirabel believe this bill is necessary and is a step in the right direction.

To conclude, because I think this will be my last speech in this Parliament before we leave and the election is held, I would like to thank all my constituents in Argenteuil—Papineau—Mirabel for a wonderful four years.

I have learned so much from the day I was elected, at the age of 22, to today, when I am 26 years old. I feel that I have grown up here, in a way, and that is thanks to the support of all these fantastic people: my colleagues, my constituents, my team and everyone who works in Parliament every day. I have enjoyed my experience tremendously, and I would like to thank them, because they are what have made it so wonderful.

I am very eager to come back in the fall. I hope to see many of the faces I see today again. To those who are retiring, my thanks and my best wishes for their retirement. I wish everyone a lovely summer. Thank you once again.

[François Choquette, NDP, Drummond, QC]

Mr. Speaker, it is my pleasure to rise in the House to speak.

I listened to the speech by my colleague from Argenteuil—Papineau—Mirabel, who has done an excellent job in her constituency and here in the House of Commons. She has been a strong voice for the status of women, among other things. I am very pleased. She talked about how important this bill is.

I would also like to congratulate my colleague from Joliette for introducing Bill C-661, An Act to amend the Income Tax Act (transfer of family farm or fishing corporation). She has done excellent work with the agricultural community. She has worked very hard, visiting farms and doing a number of tours around her constituency, to get to know the municipalities and the rural communities. She has worked with people in agriculture, and that is where this bill originates: from a broad consultation in her community that has enabled her to introduce a bill in answer to what the agricultural community has asked for.

This is what is at issue in this bill. Bill C-661 makes a small change to the Income Tax Act, but the change is one that is completely necessary and logical. Farmers all across Canada know they can count on the NDP to make more intergenerational transfers possible in family farm or fishing corporations.

For many years, in fact nearly a half-century now, the NDP has been part of the agricultural community. That community is truly important to us. One thing that is essential is to ensure that our family farms and our agricultural community do not just survive, they prosper, and that they thrive and are effective and dynamic. That is why introducing this bill is important.

We support an economy in which farmers are entrepreneurs, not wage workers. In a majority of cases, the ideal situation is to have entrepreneurial farmers. To combat land grabbing and the galloping decline in the number of farm owners in Canada, we have to be prepared to lend our farm families a hand, and that is precisely what we want to do, by facilitating transfers between members of the same family. That is what this bill proposes.

Bill C-661will facilitate intergenerational transfer in the case of a farm co-owned by a brother and a sister, for example, where the farm could be passed down only by one of the co-owners. The owner not leaving an inheritance could then withdraw without an insurmountable impact on operations, and the co-owner passing the farm on to the next generation could proceed with an orderly handover.

This is in fact a minor change. However, it will provide considerable help to family farms. It is important to remember that family farms have gone through some tough times in recent years. Here are a few statistics to support my case. For instance, in Quebec, the value of land has jumped 600% over the past 23 years. Obviously, the stakeholders in these transactions are motivated by reasons other than farm development. These transactions are often speculative in nature. This hampers our ability to save family farms. As well, we have seen family farms really running out of steam in recent years. Between 2007 and 2012, 22,235 farms ceased operations. Over 22,000 family farms have disappeared. That is a drop of close to 13.6%.

The disappearance of small and medium-sized family farms throughout Canada and in the greater Drummond area is of great concern.

I mentioned the excellent work done by my colleague from Joliette, in whose footsteps I followed. In fact, since I was elected in 2011, I have made a number of tours. Every year, I do what I call the municipality tour, the main goal of which is to tour the rural areas. I have had an opportunity to visit a number of businesses, including many family farms. I will name some of them to demonstrate the agricultural wealth and vitality in Drummond.

The Entreprises G.M. Benoit farm is an excellent dairy farm that belongs to the Benoît family in Sainte-Brigitte-des-Saults. Stéphanie, Andréane and Yanick do an excellent job and have won prizes for their high-quality products.

There is also a farm in Saint-Cyrille-de-Wendover that belongs to the Jutras family, called “Les cultures de chez nous”. This is the kind of farm found throughout Quebec, and it is a source of great pride. The family produces leeks, and the leeks from our farms are renowned throughout the region. They also produce berries and asparagus.

I would also like to mention the Claumond chicken farm in Saint-Edmond-de-Grantham.

We also have the Ferme Bel Alpaga et Bon Autruche in Saint-Bonaventure, which is owned by Claude Petit and Mélanie Boucher. As the name of the farm says, they are specialists in raising alpacas and ostriches. They also produce excellent meat that is sold in our region.

Another one is the Valnico farm in Sainte-Brigitte-des-Saults. This farm belongs to Mr. Jutras and Ms. Ross, who own dairy cows and do wonderful work. It is another family farm that has come down through the generations.

I must also mention the Canneberges Drummond farm, as there are a lot of cranberries in the region, especially in the municipality of Saint-Lucien. The Gardner family is doing a wonderful job of allowing family farms to survive.

All these descriptions are meant to show the wealth that family farms and agriculture represent in Drummond. I could name dozens more. I wanted to give these examples to show the importance of having a thorough knowledge of our rural community. In addition, it was because she understands our rural community that the member for Joliette introduced this bill.

Now let us come back to the bill. Joint ownership by the children of one family will be increasingly common over the next 10 years. We must therefore give them greater flexibility so that they can buy and sell their operation within the same family, including between brothers and sisters.

The NDP has been committed for a long time now to promoting family farms. We have a food strategy that aims at tackling farm accessibility issues, facilitating farm succession, because it is very important to have access to the capital and the land necessary for food production, providing support for planning the succession arrangements for family farms and revising the tax code to facilitate the takeover of farm businesses.

In short, this bill is extremely important, because it is a first step in encouraging our family farms. It encourages not only their survival, but also their vitality, so that family farms in the greater Drummond area, in central Quebec, in Joliette, in the province of Quebec and throughout Canada will be able to prosper. This is what is important, and this is why we are doing this work.

The House resumed consideration of the motion that Bill C-661, An Act to amend the Income Tax Act (transfer of family farm or fishing corporation), be read the second time and referred to a committee.

[Francine Raynault, NDP, Joliette, QC]

Mr. Speaker, I would like to thank my colleagues who have spoken to this bill.

In recent weeks, I had the opportunity to present my bill to farmers with the UPA. As my colleague from Drummond just said, in 2013 I toured the farms around the riding of Joliette. We had a chance to talk about Bill C-661, as well as other issues surrounding young farmers and the transfer of family farms.

I came away enriched by these discussions, which confirmed that Bill C-661 is truly a step in the right direction, if not a miraculous solution. It is a small change, but as we have said again and again, it is an important one.

Members will recall that Bill C-661 amends the Income Tax Act in order to provide that, in the case of the shares of the capital stock of a family farm or fishing corporation, siblings are deemed not to be operating at arm’s length and to be related. Currently, section 55 of the Income Tax Act is the only one that does not acknowledge that brothers and sisters do not operate at arm’s length. This is an inconsistency that affects family farms held by siblings, depriving them of the flexibility they need at this time.

I should point out that land grabs have inflated the value of farms to the point where it is now unthinkable that a farm belonging to brothers and sisters might survive if one of the owners leaves. In fact, the income tax alone on the value owned by one of the partners could destroy the farm’s profitability. In Quebec, for example, the value of land has increased by 600% over the past 23 years.

Still in Quebec, the number of transactions has increased by 67% in the past year alone, and the value of those transactions has climbed by 84%. The main players in these transactions have no interest in agriculture, and their actions are primarily speculative. It is the same throughout Canada, so much so that Saskatchewan recently passed legislation prohibiting purchases of farmland by pension plans.

This state of affairs is of great concern to me and, as a former farmer, I can clearly see the risk that it poses to the future of farming in Canada. It is dangerous. Unfortunately, I am afraid that we are encouraging an industry of paid farmers rather than entrepreneurial farmers.

Frankly, it has become impossible for a young family to get into farming if the family members do not have any relatives who are farmers, and even if they do, it is not easy to transfer ownership. In fact, the current situation is still conducive to selling to a large investment company that is outside of the family. This puts our food sovereignty into jeopardy.

Society has made this choice, but is it our choice? I do not think so. We have the ability to turn back the tide. There is still much to be done to help the next generation of farmers, but Bill C-661 is a step in the right direction. This bill is a clear solution to a glaring problem.

Over the next few years, the aging of the population will affect farming as it will everything else, and we will see more and more brothers and sisters becoming owners of a farm. We have to give them the flexibility they need to embark on this adventure confidently.

Once again, I think that the NDP has found a concrete solution for our family farms, and we will continue defending them staunchly. I hope that all my colleagues on the government side will vote in favour of this wonderful bill.

[The Acting Speaker, Conservative, Barry Devolin]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

No.

[The Acting Speaker, Conservative, Barry Devolin]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Acting Speaker, Conservative, Barry Devolin]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker, Conservative, Barry Devolin]

In my opinion the nays have it.

And five or more members having risen:

Pursuant to Standing Order 93, the recorded division stands deferred until Wednesday, September 23, 2015, immediately before the time provided for private members' business.