Bill C-208 (Historical)

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

This enactment amends the Income Tax Act in order to provide that, in the case of qualified small business corporation shares and shares of the capital stock of a family farm or fishing corporation, siblings are deemed not to be dealing at arm’s length and to be related, and that, under certain conditions, the transfer of those shares by a taxpayer to the taxpayer’s child or grandchild who is 18 years of age or older is to be excluded from the anti-avoidance rule of section 84.‍1.

Income Tax Act

[Gord Johns, NDP, Courtenay—Alberni, BC]

Mr. Speaker, many in this country are away from their loved ones, so before I get started, I note that today is my oldest daughter's 21st birthday. She is on the other side of the country, but I wish Maddie a happy 21st birthday and give her lots of love from everyone here at home.

It is always an honour to rise on behalf of the federal NDP to fight for small business. We know that small business owners are the job creators. Right now they are are creating 80% of all new jobs in our country. Bill C-208 is very important for supporting small businesses and local communities and for stopping the economic leakages from small communities in our country. These leakages often end up in the hands of large corporations because of flawed and broken tax rules that create a benefit for selling a business to those at arm's length versus a family member.

I want to thank the member for Brandon—Souris for reintroducing the bill, which shows that there is non-partisanship when it comes to supporting it. As members are well aware, the bill was first tabled as Bill C-274 by the former NDP finance critic and former member from Rimouski, Guy Caron. He fought hard, as the New Democrats continue to do, for small business.

I want to talk about what Bill C-208 would mean for small communities. We know that owners of small businesses, such as family farms and fishing businesses, as in the communities around where I live in coastal Canada, are often selling their businesses to family members. Specifically, the bill would give business owners the same rights they would normally get if they were selling to someone at arm's length. This is important, because nobody should be penalized for selling a family business to a family member, but it is happening now with the current taxation system. The bill is very important to us, and we are excited to be speaking in support of it given what it would mean to rural communities.

I cited the importance of small business for job creation. If people see a barrier to selling to someone at arm's length and will pay more tax, they will do everything they can to pay less tax. With the current structure, for example, if a person sold a family business worth $1 million to a family member, they would end up paying a dividend tax rate of about $350,000. However, if a person were to sell that same million-dollar business to a stranger, someone at arm's-length, they would end up saving $306,000 of the tax they would have paid otherwise. It makes absolutely no sense.

We want to encourage people to keep businesses in the hands of family members and encourage intergenerational business ownership, because we know that it keeps money and profits in our communities. For example, in fishing, if a person were to sell a family fishing operation to someone in their family, they would keep the quota and the jobs in the family. However, if a family member had to pay more tax, they would be more likely to sell to an international company or large conglomerate, which would hoard fishing licences and then lease them out to fishers. The same applies to farmers. Profits then leave the community at the end of the day, which is a huge economic leakage. The money is leaving the community and leaving our country in many cases, and this needs to stop.

Mr. Caron's bill tabled in the last Parliament would have supported small businesses, farmers and fishers, but it was defeated by a margin of only 12 votes. It was voted on after the government misled Parliament. The government cited that the fiscal losses would be up to $1.2 billion, but the PBO put the fiscal revenue shortfall between $126 million and $249 million. That is quite a gap. The Liberal government could have stated what it would have cost Canadians taxpayers to do the right thing to help support the sale of intergenerational businesses by not making them pay more, but instead it said the loss would be an astronomical amount of money. In fact, the PBO's numbers were somewhere between 10% and 18% of what the government had initially cited, which is a big gap.

The cost of the economic leakage and its impact on small communities across our country, and on family members, is worth the price of what we are going to lose in the long run, as we see those profits leave our communities.

We are heading into a huge period of succession in our country. A lot of small business owners belong to an aging demographic. People want to sell their businesses to their family members and keep the ownership in the community, which I assume we want to encourage. We expect over $50 billion in farm assets alone to change hands over the next 10 years, so we are heading into a huge period of succession. For farming alone it is critical that we fix this now, because we have lost 8,000 family farms in the last decade. We need to do everything we can to curb that trend because it is obviously not working for Canadians. Only half of those small business owners actually have a succession plan, while 76% of them are planning to retire over the next decade.

That is important for a lot of people who have developed and built businesses in their families. I had a business for many years. When I started it, I was not informed that if I were to sell my business to one of my three children I would be penalized with a heavy tax bill. If I sold it to someone at arm's length, I would not have incurred that same tax. It makes absolutely no sense, but most Canadians do not know that this is the current situation.

This is something we need to remedy. I hope that the government will talk about the real numbers that the PBO shared. We saw some Liberal members support the opposition in the last Parliament, so I am hoping those Liberals who decided to vote with their government's misleading information will actually support the PBO and do the right thing to support their communities and small business owners, especially those family businesses that want to maintain intergenerational ownership. In rural communities such as Courtenay—Alberni, where a large part of our main street is made up of local or small businesses, this is a really important piece to our long-term survival. We want to encourage local ownership.

Again, this bill did not pass based on misinformation in the last Parliament. The Liberals continue to make excuses on this bill. They say they will relax the rule for tax avoidance, but we want it to be done carefully to avoid these difficulties and challenges of people avoiding tax rules. If the purchaser or family member retains the shares for five years, the Canada Revenue Agency's concern is that, in the absence of a specific provision, the shares would pass from one family to another. If that five-year provision were in place, it would make that impossible. We want to make sure that we take all the excuses away from the government and alleviate the concerns of taxpayers, so that there are provisions and a system in place to protect against flipping these businesses to avoid paying taxes. This is to keep them in the hands of small business owners.

According to a 2012 CIBC study, close to 30%, or 310,000, business owners were planning to exit ownership or transfer control of their businesses by 2017, in one year alone. We do not have the recent figures. That means that a lot of businesses are changing hands right now.

I want to talk about economic leakages, because we are seeing more businesses being sold and ending up in the hands of large conglomerates. We constantly see local ownership being reduced. This kind of taxation creates a threat to local communities. We want to invest in small communities, and this is a very good way to invest in families and small communities.

Returning to closing economic leakages, we need to do everything we can. This legislation is important, but we also need to make sure that the big banks pay their share, that we cap merchant fees and that we continue to take a holistic approach to supporting small businesses. This is a good bill and I hope the government will support it as well.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, for those who may not know, the city of Joliette, for which my riding is named, was established after Barthélemy Joliette built a mill on the bank of the L'Assomption River. At that time, the city was named L'industrie, which cleary shows the importance of entrepreneurship for our regional county municipality and for the northern Lanaudière region.

I already knew that before I was elected in 2015, when my riding was booming both socially and economically. However, I have heard from many entrepreneurs about how difficult it is to transfer their business to their children, since it is less profitable than selling it to a stranger. That is unbelievable. The Bloc Québécois and I are obviously in favour of Bill C-208. We have been working on this issue for many years. In fact, my colleague from Pierre-Boucher—Les Patriotes—Verchères introduced a similar bill in the previous Parliament.

If this bill were to pass, it would have a very significant impact on Quebec. Nearly one-third of Quebec's SMEs were buy-outs, whereas that number is one-quarter for Canadian businesses. According to Marc Duhamel, a professor at Université du Québec à Trois-Rivières, the rate of business buy-outs in rural areas is around 45%. Helping the next generation of business owners would be good for Quebec, and when something is good for Quebec, the Bloc Québécois votes in favour of it.

I also know that these changes will be good for my region. My riding has numerous farms in practically every one of its municipalities, including places like Saint-Thomas, Rawdon and Saint-Ambroise. We all know a farmer, and we are proud to support our local producers in our farmers' markets, grocery stores and even the little stands we see on pretty much every major roadway.

Right now, the crux of the issue is that a business transferred to a family member is treated as a dividend, not a capital gain, unlike a business sold to someone at arm's length. People who want to sell their small or medium-sized business or their farm or fishing operation to their children are not entitled to the lifetime capital gains exemption, but if they sell to a third party, they are.

I get that the government wants to prevent potential fraud and tax avoidance, but this situation complicates the lives of everyone who genuinely wants to take over the family business. This is like asking people to slow down to 80 kilometres per hour because some people are speeding along at over 130 kilometres per hour. The government should fix this situation by allowing transfers to family members. If a transaction is fraudulent, the government can investigate it, kind of like how a police officer would ticket someone speeding on Highway 50, but would let everyone who obeys the speed limit carry on.

Speaking of tax avoidance, there are other much more concerning cases. Here are three examples the government should tackle. First, the government should immediately start taxing web giants doing business in Quebec and Canada. Second, web giants' digital services should be subject to GST. Quebec already collects QST from them. These two measures have been announced, but they should be implemented right away. Third, the government should shut down the tax haven loophole. That was my goal in 2016 with Motion No. 42.

This is a serious problem, and many people in my riding are suffering as a result. Year after year, I meet entrepreneurs who are looking for someone, the next generation, a young person, to take over the family business. Rather than taking examples from my own family, among my uncles, aunts and cousins, let me give an example that illustrates how ridiculous this situation is. I will tell you about Charles, who went to high school with my assistant.

I have met Charles a number of times since my first election campaign in 2015. Ever since he was old enough to work, Charles has been toiling in his family business, a great sound, multimedia and lighting services company, the kind you often see at festivals, fundraisers and community events in the Lanaudière region and beyond. Not too long ago, Charles and his business partner bought the company. However, the family member who owned the business would have been better off selling it only to the partner, who was already working for the business, rather than including his own son in the transaction. How is that right?

Another incongruity has to do with selling to a competitor, which would actually be more profitable than selling to the next generation, the ones who know the distributors, the customers, the activities and the local reality. This would reduce competition in the sector, possibly increase the price of services and cause the loss of local expertise.

Unlike many other businesses that have no choice but to close up shop because of tax regulations, that SME was able to keep running back home in Joliette. If I open my curtains, I can see it from my window. I could talk at length about the problems facing this industry and even more so now because of the wide-scale cancellation of activities. However, that is not what this bill is about.

I would point out that the Canadian Federation of Independent Business, the CFIB, would like to see this bill pass, which is only natural.

There are many reasons we need to keep these SMEs in the hands of the next generation. First, this would allow several regions to develop their industry. We need to fix this problem for all SMEs, but even more so for businesses in the fisheries and agricultural sectors. In Quebec and in the regions, fisheries and agriculture are among our biggest industries.

Things are looking rather bleak when it comes to the next generation taking the reins of SMEs in the future. Statistics show that in 2016, fewer than 25% of farms had secured a successor and that rate has remained the same since 2011.

Between 500 and 800 young farmers are taking over a farm each year, when in fact 1,000 are required to maintain the number of farms in Quebec. Roughly one farm a day is disappearing back home.

In the fisheries sector, there are three major obstacles to the acquisition of a business. Léa Richard, of the Comité sectoriel de main-d'œuvre des pêches maritimes, said the following:

...what is truly difficult for this next generation is access to financing, the transfer of licences and the administrative complexity. These are the three elements that make it difficult for the next generation to acquire a fishing business.

We know that it is already difficult to take over a business. It is that much more difficult in sectors that require a sizeable capital investment. For these people who have poured their heart and soul into their business, which most of the time represents their retirement nest egg, it seems unfair that it costs them an arm and a leg to sell their business to their children.

It is difficult for people to go into business and later to let go of what they have spent most of their life building. If we could at least make it easier for them to sell their business to a family member, that would be a good thing.

The government will probably remind us that we need to make choices and that this measure comes at a significant cost. In fact, the Parliamentary Budget Officer reviewed a similar bill in 2017 and estimated the cost at about $376 million. To put that in terms the Liberals will understand, that is equivalent to a little more than one-third of a contribution agreement with WE Charity, or about 40% more than the sole-source contract awarded to Frank Baylis.

This measure may be costly, but it is nothing considering how much the next generation could help business owners. Losing a business is hard on the owners, but the impact of that loss ripples beyond the owner and their loved ones. Suppliers, creditors, employees and customers lose an important partner. We often think about how the closure of a large company can have repercussions on a region, as was the case with Electrolux a few years ago in Assomption, near my riding. However, we rarely consider that the loss of multiple small businesses can have a less immediate but equally serious impact on the socio-economic fabric.

Ensuring the succession and continuity of SMEs is not only good for our economy and governments' fiscal capacity, but it is necessary for efficient land occupancy. From the North Shore to Abitibi, from Gaspé to Nunavik, Quebec has chosen to have vibrant regions, each with its own strengths, growth sectors and educational institutions, such as CEGEPs. According to Maripier Tremblay, an associate professor in the department of management in Université Laval's faculty of business administration, “Quebec's economy depends on its SMEs, but also on its regions. It is very important for businesses in the regions to retain their pools of workers.”

I will close by saying that to have strong regions, we need to have people living there. For the period from 2014 to 2023, the Board of Trade of Metropolitan Montreal estimates that between 79,000 and 140,000 jobs in our SMEs could be lost due to the entrepreneurial deficit. That is a gigantic number.

That is like one or two whole ridings of workers disappearing in 10 years. When many families leave a region, it has significant consequences for the entire ecosystem.

The House resumed from November 25, 2020, consideration of the motion that Bill C-208, An Act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation), be read the second time and referred to a committee.

[Richard Lehoux, Conservative, Beauce, QC]

Madam Speaker, I am pleased to speak in support of Bill C-208, an act to amend the Income Tax Act with regard to the transfer of a small business or family farm or fishing corporation, which was introduced by my colleague, the member for Brandon—Souris.

The amendments made by this bill are necessary to standardize the process for selling family businesses. These amendments would considerably improve the Income Tax Act with respect to the transfer of a small business or family farm to a family member.

In the current state of affairs, the sad reality faced by business owners is that they must pay more taxes if they sell to a family member than if they sell to a third party. The current act puts operators who want to transfer their family business to their son or daughter at an unfair disadvantage. This forces owners to decide whether they want to keep their life's work in the family or sell it to the highest bidder.

If this bill were adopted, it would facilitate many more family business successions. It would also guarantee the retirement savings that business owners worked so hard to earn and enable more local businesses to prosper, which would strengthen the Canadian economy and local economies. We must never lose sight of the fact that SMEs are the cornerstone of our economy.

Everyone in the House knows a factory, a family restaurant, a corner store or a farm in their riding that has been around for generations. These family businesses are well liked and extremely important to the local economy. These small businesses are the backbone of our society. Some of these businesses not only help feed our communities, but they also provide important jobs for the people in our ridings.

The dynamic of keeping a family business in the family is unprecedented. The idea that an owner could be forced to sell their business to a third party simply because of overtaxation is simply shocking. When a third-party purchaser buys a business, many unknowns come into play. Will the new owner cut jobs? Will they move the business to a different region or even a different country? These are the questions the seller must keep in mind, but also their employees and family members.

We know that Beauce is a haven for SMEs. I will provide two real-life examples from my riding.

My first example is Eddy Berthiaume, the owner of Les escaliers de Beauce, located in my hometown of Saint-Elzéar, who was forced to make the difficult decision that I just explained to the House. He owned 50% of this business for many years. He is a good, hard-working man who spent years building his business. When he was ready to retire, he decided to sell his shares in the family business to his children, but unfortunately, he was unfairly forced to pay thousands of dollars in transfer fees. The worst part of this story is that his business partner was able to sell his 50% stake to a third party and pay a pittance in taxes. He paid essentially nothing.

Some may wonder how this is unfair. There are other examples like this one that show how the government is letting down business owners across the country. We need a government that is prepared to grant exemptions to Canadians and that does not penalize tenacious families like the Berthiaumes.

My second example is Estampro, a business in Saint-Évariste-de-Forsyth owned by the Fortin family, who dealt with the same rules for transferring the business to a family member. The business, which was founded in 1984, is already run by the third generation of Fortins. The family had to work extremely hard to get there, however. The time and money they spent on filling out forms for the transfer certainly could have been used to hire extra machinists or to make more progress on automation. Instead, the family was trapped in all of the red tape required by the existing legislation, and we cannot underestimate the impact this has had on the family. I spoke with them this week, and I know that they are seriously wondering what problems they will encounter if the business is transferred to the next generation.

I am sure many of my colleagues are aware of cases like these. There are many others throughout my riding. If the House does not act now, then wonderful, healthy, viable, proudly Canadian companies will end up in the hands of people other than the families that built them or, even worse, in the hands of foreign countries.

This bill will also help Canadian business owners by advancing women's entrepreneurship. Only 16% of businesses and 29% of family farms are majority female-owned. If the government stopped penalizing owners of small businesses and family farms who sell their businesses to their daughters, it would help foster entrepreneurship among women and increase their participation in the Canadian economy.

It is very unfortunate that our party is obliged to introduce bills like this one when we have a government that claims to always be there for women and small businesses. We need the government to get involved and quickly examine the issues raised by bills like this one.

This bill is not partisan in any way. I think that the amendments to this private member's bill are not only a matter of fairness, as many of my colleagues mentioned, but also a matter of common sense.

I cannot believe that this government has not already introduced amendments to the Income Tax Act in this area.

We need to treat business owners fairly. These tax policies are unfair when the time comes for them to step down from their family business. Leaving a family business can be a positive thing if they know they are leaving it in the hands of someone they love and, more importantly, someone who will love and honour the values and culture of the business, as the owner did for many years.

Business owners should not feel like they have to sell their business to a third party simply because it will cost them less. Business owners must also obey the law. We would not want them to make concessions or act fraudulently in order to save the hard-earned pension or retirement savings they would otherwise lose in taxes. That is why it is important that Bill C-208 pass in the House as quickly as possible.

I heard some of my colleagues say that changes to this bill could lead to more fraud and tax evasion. That is why our party wrote protection mechanisms into the bill. To forestall those potential problems, the bill provides that the family member purchasing the business must keep their shares for at least five years to avoid the penalty. This will thwart attempts to exploit the system.

Right now, and especially during this global pandemic, Canadian businesses need our help, not just to stay afloat while we fight the pandemic together, but also in the future when the time comes to sell and buy their family businesses. Canadians want to remain self-sufficient. They want to support their local businesses. Most of all, they want their local businesses to succeed from one generation to the next.

I hope the Conservative Party can count on all parties to vote for this bill, which is so important to our family businesses. I speak from experience, because I myself was part of the fourth generation of a family business.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Madam Speaker, I am pleased to rise on behalf of the NDP caucus today at second reading of Bill C-208. We will be according our support at second reading to take it to committee. As I already indicated, we will be looking potentially for some clarifications around the bill when it goes to committee.

I need to praise Guy Caron, the former member of Parliament for Rimouski-Neigette—Témiscouata—Les Basques, for his good work in advancing this issue. This is not an insignificant issue. It is extremely important for the next generation of people running small businesses across the length and breadth of our country, for family farms to be passed down from one generation to the next and for fishing corporations to be passed down as well to maintain the vital fishing industry on our coasts across the country.

These are important points that Guy Caron brought forward to Parliament which we are now debating to take to committee. These extremely important things must be put into place.

I am a long-time member of the New Westminster Chamber of Commerce and the Burnaby Board of Trade. Because of that long-time involvement in the Board of Trade and Chamber of Commerce, I have worked with small businesses. I also ran a social enterprise myself.

It is extremely important to maintain those family-run businesses across the country. In many communities, family-run businesses are really the backbone of a community's economic development. Ending what is a very perverse aspect of our tax system and facilitating, in a sense, small businesses under $1 million to be passed from one generation to the next without penalties being incurred makes a big difference for family-owned business.

As well, I come from a farming family. My mother's family ran a farm in Alberta when it originally came from Norway and settled in the Cariboo Hill area of Burnaby. The area now known as Cariboo Park was the family farm.

Families that have run farms for generations have nothing but my deepest respect. Again, we have to end the perverse penalties that exist right now for families that want to pass their farms from one generation to the next.

I am going to set aside my speech for a moment because I would like to respond to the member for Newmarket—Aurora, who spoke to the bill on behalf of the Liberal government. He basically questioned the impacts on the tax base of putting forward these measures.

The Liberal government has completely collapsed the tax base in the country. I find it incredible, quite frankly, for any Liberal to stand in the House and say that he or she is concerned about the tax base for something that is of far less significance on the scale of the federal budget than it is in the positive impacts small businesses and farms would feel across the country.

The reality is, as the Parliamentary Budget Officer has pointed out, the government has undermined the tax base to the point that we lose over $25 billion a year to overseas tax havens. In terms of housing, education, health care expanding to pharmacare and dental care, $25 billion lost each and every year, $125 billion since the Liberals came to power, is an astronomical amount.

CRA representatives who came before the finance committee indicated that the reason nobody had ever been prosecuted for the Panama papers or the paradise papers, the well-known documentation around the use of overseas tax havens, was because they had never been given the tools by the Liberal government to crack down on these overseas tax havens. For the government to pretend its concern is the tax base, when it has done anything but, as an excuse, a pretext, for opposing the bill is difficult to believe.

In addition, as you well know, Madam Speaker, the NDP has brought forward provisions around the wealth tax and the excess profits tax. The leader of the NDP, the member for Burnaby South, has been very clear in this respect. The federal Liberal government has simply refused to undertake those measures, even though we know Canadian billionaires have added to their wealth, over $37 billion since the beginning of this pandemic.

The banking sector has received over $750 billion in liquidity supports and their profits have been astronomical as well. Just in the first two quarters, over $15 billion in profits have been supported by federal government institutions, ensuring, with as much largesse as possible, that they have everything taken care of during this pandemic.

In previous crises that the country has gone through, for example, the Second World War, there were strict laws against profiteering. There was an effective corporate tax rate to ensure we were all in this together. The government has refused to do the right thing, whether it is cracking down on overseas tax havens, bringing in a wealth tax or proposing an excess profits tax. It has undermined and destroyed our tax base.

What many Canadians are concerned about is the fact that this could well lead to austerity when Canadians are not getting the supports, in so many cases, they need to get through this pandemic.

The last point I would like to make in reply to the member for Newmarket—Aurora is that he seemed to be very proud about the government support for small businesses. If he spoke with small businesses, the member would know that nothing could be further from the truth. The NDP put pressure on the government to bring in the wage subsidy. The NDP was able to achieve that in this minority Parliament.

However, the rent relief program was a massive failure. The member for Courtenay—Alberni, the NDP small business critic, has raised this repeatedly. Now we have a rent relief program that will fix all the problems with the old one, but the federal Liberal government has refused to put into place the retroactivity that would allow small business that did not get any rent relief in the first version, because it was so badly botched, to apply retroactively for rent relief.

The pretensions of why Liberal members would oppose the bill are disingenuous, to say the least, when the Liberal government has done everything to destroy our tax base, while at the same time has not offered the supports for small business, which are so desperately needed.

A number of people have talked very positively about the bill.

Dan Kelly, president of the CFIB, has said, “Many small business owners are telling us that tax rules discourage them from passing on their firm to their children.”

This time Mr. Kelly was speaking about Guy Caron's work, when he said that the “Bill addresses this unfairness and will help small business owners ensure their firm remains locally owned, creating and protecting local jobs.”

Ron Bennett, president of Canadian Federation of Agriculture, has said, “Simply put, if taxation barriers aren't addressed, we will see fewer and fewer family farms in Canada. We support Mr. Caron and his colleague's commitment to addressing these tax burdens that could cause significant administrative burden.”

The bill introduced by Guy Caron, the former member for Rimouski-Neigette—Témiscouata—Les Basques, was supported by many organizations, including the Fédération des chambres de commerce du Québec, the Board of Trade of Metropolitan Montreal, the Union des producteurs agricoles du Québec, the Agricultural Alliance of New Brunswick and the Producteurs de lait du Québec, not to mention several other organizations representing supply-managed farms.

This is part of what should be done to preserve family farms while above all continuing to support a stronger supply management system. We will be supporting the bill and hope to discuss it at greater length in committee.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Madam Speaker, it is an honour for me to rise in the House.

Before I got into politics, I was the secretary to the Fédération de la relève agricole de l'Abitibi—Témiscamingue. My colleague, the member for Brandon—Souris, might be interested to know that.

The matter of transfers, particularly transfers to family members, is very important in Abitibi—Témiscamingue. I remember participating in a workshop about transfers hosted by the Réseau Agriconseils. A number of people attended because they were concerned about this issue, particularly since land value is different in Abitibi—Témiscamingue. Since our land is worth less than land in other parts of Quebec, it cannot be used as security as often. That is not the subject of this speech, but it is relevant when we are talking about the facility of transfer when a business is being transferred to a family member.

I had the opportunity to talk about this when I participated in the convention of the Fédération de la relève agricole du Québec, which took place in March in Rouyn-Noranda, located in my riding of Abitibi—Témiscamingue. As impossible as it may seem, still today, business owners are better off transferring their business to external shareholders than to a member of their own family.

I want to thank the member for Brandon—Souris for introducing his bill. I would have liked to introduce it myself, much like the member for Berthier—Maskinongé, as it is a fundamental issue. The Bloc Québécois supports Bill C-208. For several years now, my party has been calling for measures to encourage and facilitate the transfer of family businesses, especially in the agriculture and fisheries sectors. In fact, I would point out to my colleagues in the House that the member for Pierre-Boucher—Les Patriotes—Verchères introduced Bill C-275, an act to amend the Income Tax Act regarding business transfer in the previous Parliament.

The Bloc Québécois has been calling for measures to encourage and facilitate the transfer of family businesses for more than 15 years. For Quebeckers, for the Bloc Québécois, and for me, business succession is important. The next generation is important for the future of our SMEs in general, but especially for the family farming businesses in the Abitibi—Témiscamingue region.

Business succession is a major and promising phenomenon across Canada and especially in Quebec. Nearly one-third of Quebec's small and medium-sized businesses were buy-outs. In 2017, one-quarter of Canadian SMEs were takeovers. In Quebec, the majority of business buy-outs are in rural areas, where 44% of the SMEs belong to entrepreneurs who have taken over a business. In Canada, that figure is around 31%, according to UQTR professor Marc Duhamel, a regular researcher at the UQTR's small business research institute. Unfortunately, the government's unfavourable tax rules do little to encourage business succession.

The risk of sales to foreign buyers and businesses being lost is very real. In 2018, it was estimated that between 30,000 and 60,000 Quebec businesses would not find a buyer in the years to come and would die as a result. That represents around 150,000 jobs and $8 billion to $10 billion in revenue.

Right now, Quebec is losing one farm a day. That is alarming. The risk of sales to foreign buyers and businesses being lost is very real. In Quebec, the next generation of entrepreneurs is suffering badly. Unfortunately, this Parliament is not doing enough to support business succession.

Why does the Liberal Party not want to put a family member on equal ground with a foreign investor? Here are the facts. Under the existing legislation, the transfer of a business to a family member is treated as a dividend and not as a capital gain, unlike a sale to a third party. As a result, owners are not entitled to the lifetime capital gains exemption if they decide to sell the business to their children. The existing legislation is an affront to common sense.

Why does the Liberal Party of Canada refuse to amend the Income Tax Act? As we just heard, they appear to be worried about condoning tax evasion. That would explain why the Income Tax Act makes no mention of the notions of transferring, shuttering or selling a small business to a family member, for fear of potential abuse or tax fraud. If abuse and tax fraud are actual reasons, I am having trouble understanding why the Liberal Party continues to do nothing about tax havens.

As the member of Parliament for Abitibi—Témiscamingue, I have had the honour, along with members of my team, to speak with many farmers in my region week after week. I want to acknowledge the president of the Fédération de la relève agricole, Meghan Jarry. The federation and all business owners in Quebec see business succession as a key way to stop the outflow of businesses and Quebeckers to urban centres and to make it easier for young entrepreneurs to take over the family business.

Business succession is essential for Abitibi—Témiscamingue. It is essential for all of Quebec. The future of the Abitibi—Témiscamingue region is in the hands of the next generation of farmers.

I want to quote a farmer from the region, Simon Leblond, who is also a friend and a member of the Fédération de la relève agricole du Québec. He was the president of FRAQ when I was the secretary there. He said the following:

I am certainly going to have challenges, starting with the financing and development of my company, of course. There are also other issues unique to my region, including maintaining a large enough pool of producers to maintain services for farms and, more generally, to ensure the vitality of the industry and make it known to those outside the world of agriculture.

The next generation of farmers is essential because it ensures the vitality of agriculture, which in turn ensures the vitality of the towns in our regions. The vitality of our regions ensures the vitality of Quebec, the dynamic use of our land.

I think we need to talk about distress. In Abitibi-Témiscamingue and other parts of Quebec, farmers young and old are struggling. They have to deal with red tape, paperwork, long hours of work, their roles as mothers or fathers, bills, the stress of everyday life, the stress of being in debt, equipment that breaks down and has to be repaired or replaced, short production and crop seasons, poor weather conditions and all of the other pressures they are under.

Farmers are in real distress. Encouraging and facilitating the transfer of family businesses could alleviate some of that distress. I think that is an important reason for members of the House to support Bill C-208.

Now I would like to talk about what things are really like for new farmers. We all know farmers are stubborn and tenacious people. They are probably the most resilient members of our society. Young farmers are constantly looking for ways to access assets and encourage the transfer and start-up of agricultural businesses in Quebec. They face major challenges, including land grabbing and land financialization, income security, vet services for farm animals, crop insurance and agricultural drainage. These are major challenges. Improving access to land and improving quality of life for Quebec's young farmers is one way to ensure a future in agriculture for Quebec's youth.

It is the duty of this Parliament to create conditions conducive to establishing the next generation of farmers in order to attract that next generation and secure the future of small and medium family farms. That cannot happen without easier access to land. Transferring a farm is the best way to get a start in farming because starting a farm from scratch is very hard.

On top of that, land prices, the cost of quotas and production standards are increasing every year. Farm values are increasing. It takes longer and longer and is increasingly difficult to transfer the farm to one's children. Paying back the loans needed to purchase a farm takes so long and the red tape is becoming increasingly cumbersome, making it increasingly difficult for farmers to access land and operate their businesses. Farmers want the process for purchasing a farm to be simplified. Some are calling for a single-desk model to avoid having to speak to too many stakeholders in a transfer process. Everything I have mentioned from the beginning of my speech reflects opinions expressed by the Fédération de la relève agricole du Québec, which works to improve the lives of young farmers in Quebec.

Just today, actually, I spoke with Julie Bissonnette, the president of the FRAC, and its executive director, Philippe Pagé. Regarding the transfer of a family farm, the Fédération de la relève agricole du Québec is unanimous: It is just wrong that it is more advantageous to sell the family farm to a stranger than to a family member. Julie Bissonnette told me today that she is always asked about this issue no matter where she goes. Young farmers in Quebec and the Abitibi—Témiscamingue region have been calling for legislative changes for several years now.

She also told me that it was a problem on both sides. The transferors also want this to change. The oldest farmers in Abitibi-Témiscamingue want to transfer their farms to family members. This means that local farming will be put on hold. Dozens, if not hundreds of young future farmers and transferors want to be able to make transactions. This is a global issue. This desire to transfer their farm to their children is part of what has been driving older farmers to work as hard as they do and invest so much time in it for 30, 40 or 50 years. It may even span two, three, four or five generations. Farmers work like mad to provide a future to their kids. Selling their farm to a stranger can lead to feelings of failure or profound grief.

For farmers, it is a big step to hand over the farm to their children out of love and devotion. That is what I have heard from FRAQ members, young and old alike, who feel concerned. Their greatest wish is to be able to hand over their farms to their families.

I will conclude by mentioning that the tax arguments raised when the last point was rejected do not hold up well if we look at the PBO study. In my opinion, if things are not moving right now, it is because there is a flagrant lack of political will on the part of the Government of Canada. This lack of will needs to stop, and that is why the Bloc Québécois supports Bill C-208.

I expect the House to unanimously support this bill in order to prevent this outflow of people to urban centres and to foster the entrepreneurial spirit of our young farmers.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Madam Speaker, I grew up on a small 50-acre farm and, in spite of having 11 labour-cost-free children, my father still required off-the-farm income because he realized it was not easy to feed 11 children with what we could produce on the farm.

I am pleased to take part in the debate today on private member's bill, Bill C-208, which aims to facilitate the transfer of family businesses between family members.

Ensuring the sustainability of small businesses, family farms and fishing corporations is essential to our economy and to the communities that they serve. This has been underscored by the critical need to support families and communities as we continue to fight COVID-19. Our government understands this. From the outset of the pandemic, Canada's economic response to COVID-19 has introduced a range of support measures for small businesses to help bridge them to the other side.

Simply put, we have their backs. That extends to helping family businesses thrive for generations to come.

Encouraging the sale of family businesses to family members often means those businesses will remain in, and continue to benefit, their communities as well as the families that fought hard, sacrificed and succeeded through pure determination and entrepreneurial spirit. It is with this spirit in mind that Bill C-208 bears careful consideration.

Bill C-208 seeks to amend two of the Income Tax Act's most important and complex anti-avoidance rules. These rules deal with inter-corporate dividends, share sales and circumstances under which the lifetime capital gains exemption is charged. Any relieving changes to these sections of the act must be done cautiously, following rigorous study and debate, to avoid unintentionally creating loopholes that would disproportionately benefit the wealthy instead of protecting the middle class and those working hard to join it.

Section 84.1 of the act, in particular, is in place to apply an anti-avoidance rule where, when appropriate, an individual sells shares of one corporation to another corporation that is linked to an individual, such as a family member. When an individual sells shares of a Canadian corporation to a linked corporation, section 84.1 of the act deems, in certain circumstances, that the individual has received a taxable dividend from the linked corporation rather than a capital gain. This prevents the individual from realizing the proceeds of the sale on a tax-free basis using the lifetime capital gains exemption.

This rule is meant to ensure that taxpayers cannot use linked corporations to, in effect, remove earnings from their corporations, using a sale as a basis to do so. Without this rule, such sales between related parties could be used to convert what should be dividends to an individual shareholder into capital gains that are tax free under the lifetime capital gains exemption.

Bill C-208 proposes narrowing the scope of section 84.1 by removing the sale of shares of small businesses, family farms or fishing corporations from its application, when they are being sold by an individual to another corporation that is owned by their adult child or their grandchild. This change would allow the owner-operator of a family business to convert dividends to the corporation into a tax-free capital gain.

It is important to note that there is currently nothing in the act stopping a parent from selling the shares of a family business directly to their child or grandchild on a tax-free basis using the lifetime capital gains exemption, which currently shelters up to $1 million in capital gains on qualified farm and fishing properties. The issues sought to be addressed by Bill C-208 arise only in multi-tier corporate structures, where one corporation owns a second corporation. Adopting the proposed changes to section 84.1 could open the door to new tax-avoidance opportunities.

Bill C-208 also proposes amendments to section 55 of the act, which generally applies to corporations that seek to inappropriately reduce capital gains by paying excessive tax-free dividends between corporations, which the act considers to be a capital gain.

Two exemptions to these anti-avoidance rules authorize businesses that are restructuring to allow company shareholders to split company shares between them while deferring taxes. The first exemption applies to the restructuring of related corporations and the second applies to all corporate restructuring.

Bill C-208 would broaden the first exemption so that it applies to brothers and sisters, despite long-standing tax policy that considers brothers and sisters to have separate and independent economic interests for these purposes. Any change to this exemption would risk eroding our tax base.

Spouses, as well as parents and their children, are already eligible for this exemption, because it is presumed that they have shared economic interests. Although brothers and sisters cannot restructure their participation in a corporation on a tax-deferred basis under the related corporations exemption, they can do it under the second exemption of section 55, which applies to all corporate restructurings.

This is called the butterfly exemption, and there are few tax avoidance opportunities under it. If the proposed amendments under section 55 included in Bill C-208 were passed, siblings could undertake business restructurings in which otherwise taxable capital gains realized between corporations would be converted into tax-free intercorporate dividends, which would create new opportunities for tax avoidance in Canada.

I will conclude by saying that we know many businesses are continuing to face stress and uncertainty due to COVID-19. Our government has stepped up to the plate to make sure that they have the support during these unprecedented times.

We have made unprecedented support available to Canadian businesses, including the Canadian emergency business account, which has provided 758,000 business loans totalling $30 billion. The Canada emergency wage subsidy has supported the wages of more than 3.5 million employees totalling $36.7 billion.

Just this week applications were opened for the new Canada emergency rent subsidy, which will provide simple and easy-to-access commercial rent support and an additional lockdown support of 25% for businesses that have temporarily shut down due to mandatory public orders. Combined, this will mean the hard-hit businesses subject to lockdown will receive rent support up to 90%.

Our message to businesses remains the same. We have their back.

There are important considerations to take into account when we are reviewing the merits of Bill C-208. Our government remains committed to working with family businesses, including farming and fishing businesses, to make it efficient, or less difficult, to hand down their businesses to a next generation. However, we must exercise caution when making amendments to the Income Tax Act.

[Larry Maguire, Conservative, Brandon—Souris, MB]

moved that Bill C-208, An Act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation), be read the second time and referred to a committee.

Madam Speaker, it truly is a humbling moment to stand in this chamber and put one's name to legislation and ask one's colleagues to support it. As fate would have it, today marks the seventh anniversary of my representing Brandon—Souris since the by-election that took place on November 25, 2013.

Private members' bills give us the opportunity to set aside our political allegiances, to rise as parliamentarians and to champion the causes of issues whose time has come. In that spirit, I reached out to all the MPs in this House from other parties, to speak about this legislation back before the first reading. I want to specifically thank Guy Caron, who spearheaded this legislation in the last Parliament. Now it is up to us to pick up where he left off and pass it into law.

The essence of this bill is pretty straightforward. Bill C-208 would allow small businesses, farm families and family fishing corporations the same tax rate when selling their operations to a family member as they would if they sold it to a third party. Currently, when a person sells their small business to a family member, the difference between the sale price and the original purchase price is considered to be a dividend. However, if the business is sold to a non-family member, the sale is considered a capital gain. A capital gain is taxed at a much lower rate and allows the seller to use the lifetime capital gains exemption.

It is completely unacceptable that it is more financially advantageous for a parent to sell their farm or small business to an absolute stranger than it is to their own children. I want to give two specific examples this afternoon on how this legislation will help families transfer their operations when they decide to make that transition.

Imagine a bakery that a couple have owned for about 30 years. The couple running the bakery are now ready to retire and another bakery has reached out to indicate that they would like to purchase it from them. However, their daughter has worked with the couple throughout the years in that bakery as she has grown up and has indicated that she wants to take over the family business. Like a lot of small business owners and farmers, they could not afford to put large sums of money away into RRSPs and other saving vehicles, as any extra money that they had went into their own small business.

This couple would rely on the sale of the bakery to basically fund their retirement plans, so they call upon an accountant to start a conversation about different planning scenarios. Their accountant comes back to them, saying if they sold the bakery to the other company, rather than their daughter, they would have an effective tax rate of 10% after using their lifetime capital gains exemption. Their accountant also told them that if they sold the bakery to their daughter, she would be obligated to repay their loan with personal tax dollars, which is a significant penalty. Compared to selling their bakery to the other company, it would render the effective tax rate to be significantly higher. With that information in hand, they have a family huddle and discuss the options.

The couple is now seriously considering selling the business outside of the family as they do to want to put the burden of their tax obligation on their daughter. It would inhibit her ability to make a living and grow the business. On the sale of shares to the bakery, this couple should be indifferent to selling shares to their daughter or the other company. Their daughter should not be penalized for purchasing shares from her parents and should be able to fund the purchase with corporate funds, as she would if she were to purchase the business from an unrelated party.

Bill C-208 would allow the next generation to become business owners and to keep businesses locally owned. With this bill, Bill C-208, we can fix this injustice once and for all. Right now many small businesses are struggling. This pandemic has been one of the most disruptive times in our lifetime. Across our country, no community is immune from its impact. To those entrepreneurs who are listening to this speech tonight, I have their back. Anyone who has ever run their own business understands the massive responsibility and stress that comes with being one's own boss. They are risk takers and job creators. Small business owners make up the backbone of our economy.

From tradespeople to grocers, and everything in between, entrepreneurs are the pillars of our communities. It is not easy to start a business. Some people must take out massive loans just to get their doors open. They put everything on the line to make their operations a success. Hopefully, after many years of hard work, they slowly and surely pay off their debt, expand their business and create even more jobs in their own communities. They pour their hearts and souls into their businesses and, when they are ready to enjoy retirement, there would be no greater joy for them than to see what they built be transferred to their child or grandchild.

As a young entrepreneur, I was one of those who was able to carry on the legacy of my parents. In 1948, my mom and dad carved out a little slice of heaven and started our farm near Elgin, Manitoba. My brother and I are proud to be the sons of farmers.

In the words of Paul Harvey:

And on the 8th day, God looked down on his planned paradise and said, “I need a caretaker.” So God made a farmer. God said, “I need somebody willing to get up before dawn, milk cows, work all day in the fields, milk cows again, eat supper and then go to town and stay past midnight at a meeting of the school board.” So God made a farmer.

I learned a lot from my parents. There were times when they were incredibly tough. Sometimes commodity prices were in the basement. There were other times when equipment would break down just when it was needed the most. I know life is not always easy. It never has been, and it probably never will be.

However, the legislation we have before us today sends a strong message to all those family-run businesses that it will no longer be more financially advantageous to transfer a business or farm to a stranger than to their own children because of tax purposes.

The other example I want to give is of a farmer who is set to retire in the next couple of years and is reviewing succession options. The farmer wants his son to take over; however, he wants fair market value for his farm in order to fund his retirement, as well.

If a third party were to ask to purchase the shares of the farming company, the purchaser would be able to purchase those shares through a corporation. By selling his farm to this third party, the farmer could use his farm capital gain exemption on the sale, resulting in a 13.39% effective tax rate.

However, if the farmer sold his farm to his son, that sale would be recorded as a dividend, rather than a capital gain, and the farmer would pay 47.4% in tax. That is over 34% more in tax. I think we can all agree that it is completely unfair for the tax rate to be significantly higher when the farmer sells his operation to his son rather than to a third party who, in many cases, is a complete stranger.

Bill C-208 sends a message of hope to young farmers who want to carry on what their parents started. There is something special about being connected to the land and reaping what one sows, as is true for any small business. It is an attachment.

In Manitoba and other provinces, there are Century Farm Awards to celebrate farm families who have maintained continuous production for 100 years or more. Many of these in the Prairies are now well over 125 years. I have attended many centennial farm celebration ceremonies, and the faces of the family members involved show how important this milestone is for them.

Farm families face unique pressures in succeeding their operations, including the increasing cost of land, the average age of farm operators and the capital requirements for those entering the industry. The passage of this bill would eliminate the unfair tax rates that make it difficult to keep businesses under family ownership.

With that, I ask my colleagues to reach out to their constituents and ask them if they should support this legislation. Ask those constituents if they think it is unfair that selling a business to their children should be more expensive than selling to a stranger.

This legislation would impact every single constituency in Canada. From a family run farm in Cumberland—Colchester to a family run business in Winnipeg North or a fishing enterprise in Miramichi, people are looking to their members of Parliament to support this bill.

With that, I ask all members to join me in passing Bill C-208. By working together, we can support our entrepreneurs, small businesses, farmers and fishers who make up the backbone of our economy. Let us roll up our sleeves and get this job done.

[The Chair, Liberal, Ginette Petitpas Taylor]

No. Thank you so much for that. That's great.

Perhaps now we can proceed through each item. To be efficient with our time, we could maybe just go through them item by item, and if there are no questions or comments, we can dispose of them fairly quickly. We'll be able to address the ones for which there is debate.

Does that sound appropriate to everyone?

We'll start off, then, with Bill C-210. Does anyone have any issues or comments about that one? No.

Next is Bill C-238.

I see there are no comments, so we'll move right along to Bill C-224. Good.

Next is Bill C-215. No comments.

Next is Bill C-204, and now Bill C-229.

I'm not going to jinx it, but we're on a roll.

Now we have Bill C-218 and a motion, M-34.

Next we have Bill C-214, Bill C-220, Bill C-221, Bill C-222 and Bill C-213.

I love working with women.

Next is Bill C-223, followed by M-35.

Now we have Bill C-206, Bill C-216, Bill C-208, Bill C-205, Bill C-237, Bill C-225, Bill C-228, Bill C-236, Bill C-230 and Bill C-232.

[Larry Maguire, Conservative, Brandon—Souris, MB]

moved for leave to introduce Bill C-208, An Act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation) .

Mr. Speaker, I am pleased to rise today to introduce my private member's bill, an act to amend the Income Tax Act regarding the transfer of small businesses or family farms or fishing corporations. This legislation would level the playing field for small businesses, family farms or fishing corporation owners when transferring their operation to a family member.

Currently, when a person sells his or her business to a family member, the difference between the sale price and the original purchase price is deemed to be a dividend. However, if this business is sold to a non-family member, it is considered a capital gain, which is taxed at a lower rate and allows the seller to use his or her lifetime capital gains exemption.

The bill would allow small businesses, family farms and fishing corporations the same tax rate when selling their operations to their family member as they would selling it to a third party.

I encourage all members to support this bill to promote sustainable small business succession, enhance opportunities for entrepreneurship and end the inequitable taxation of those transferring a small business, farm or fishing corporation to a family member.

(Motions deemed adopted, bill read the first time and printed)