Thank you, Mr. Chair and committee members, for inviting me to speak today about budget 2019. While this is taking place over the dinner hour, I'm happy to see some of the members enjoying fresh fruit and vegetables on half their plate during committee, which, interestingly enough, will tie into my comments.
Under the theme of competitiveness, CPMA submitted five key recommendations for the committee to consider, which we believe would greatly benefit the industry and ensure long-term competitiveness for the sector. My remarks will address the following recommendations: progressive changes to the small-business deduction, funding for a new food policy and national food policy council, the development of a long-term data strategy for agriculture and agri-food, and funding to support an innovative fruit and vegetable industry in Canada.
CPMA is advocating today for two progressive changes to the small-business deduction, which would more accurately reflect modern agricultural small businesses and their operational requirements. These include changes to the limits within the small-business deduction and an expanded exemption for affiliated corporations.
Increasing the federal business and capital asset limits with regard to the small-business deduction would modernize the tax code by adjusting limits to 2018 numbers and tying them to inflation moving forward. The federal business limit for the small-business deduction has not increased since 2009, and the capital asset limits have not increased since they were established in 1994. The most significant impact for agricultural small businesses would be from increasing the capital asset limits, which are used to qualify for the small-business deduction. As you know, modern agricultural businesses, even small businesses, are capital-intensive and require significant capital investment by producers. Now is the time to modernize the limits of the small-business deduction and recognize the capital-intensive nature of modern agricultural small businesses.
Second, we are calling on the government to exempt agricultural businesses from the recent changes to the rules of affiliation and their impact on the eligibility for the small-business deduction. Under the rules released in 2016, which took effect this current tax-filing year, affiliated corporations must now divide their small-business deduction pro rata between the affiliated corporation and its shareholders, a stark change from the previous policy, which allowed both the corporation and its shareholders to individually claim their small-business deduction.
For the fresh produce industry, affiliated corporations are an effective business structure to consolidate product across multiple farms, share costs for packing and marketing, and allow retailers to deal with a single point of contact rather than multiple farming operations in an area.
Knowing this, we urge the government to expand the current exemption under these new rules offered to agricultural co-operatives to any affiliated corporation in which the majority of shareholders derive farm income as defined by the Canada Revenue Agency. We believe that the policy change has had an unintended impact on the agricultural sector, sometimes in the hundreds of thousands of dollars per company, and that a blanket agricultural exemption would recognize the unique nature of agricultural businesses and business structures that are used in order to be competitive in the marketplace.
Our third recommendation relates to the upcoming food policy in Canada. Recognizing the tight time frames you have here at committee with your need to go to the House, I will just quickly note that our request is simple. We're asking for a fully funded food policy for Canada, including the creation of a national food policy council. We've had over 45,000 Canadians participate in the consultations, and that clearly indicates that this is of importance to them from coast to coast. We believe that a new food policy would have great potential to establish an action plan that would help us grow the economy, address important social issues, and provide a road map for the future of food in our country. We are one of 50 organizations that have signed a letter of support to create a national food policy council, and funding would be essential to drive that forward.
Our fourth recommendation to the committee is on a perennial issue for all agriculture: the lack of data. Unlike many countries, such as the U.S. and Australia, Canada has a significant data deficit when it comes to agriculture. We're calling on Agriculture and Agri-Food Canada and Innovation, Science and Economic Development Canada to strike a joint data working group to develop a long-term agriculture and agri-food data strategy. Our hope is that such a strategy would identify current data gaps and outline a path forward on how data could be utilized to increase our competitiveness in the global marketplace.
Our members consistently ask us for data that is not currently available or requires significant funds to acquire through a third party provider. Information such as purchasing choices, consumer trends, import-export numbers and commodity-specific information would allow our members to identify new market opportunities and new product development and increase their competitiveness.
Finally, our fifth recommendation is on innovation. CPMA has recently begun its process of developing and implementing a new innovation strategy for the fresh produce industry. This strategy will aim at connecting CPMA members with Canadian researchers, new start-ups and post-secondary institutions through a virtual innovation hub. Furthermore, CPMA will be launching a new national hackathon geared at post-secondary students and start-ups aimed at addressing the biggest challenges to promoting innovation in our industry and driving our businesses.
CPMA supports the current government's initiatives to promote innovation, but encourages an expanded innovation strategy, potentially including joint funding mechanisms, which would enable all industries, including small and medium enterprises, to participate in an innovation ecosystem and scale up to drive their competitiveness.
Thank you to the committee for allowing me to speak. I look forward to questions later.