Good morning.
My name is Isabelle Bouffard. I am the director of the Direction recherches et politiques agricoles, Union des producteurs agricoles (UPA). I am here with my colleague Marc St-Roch, who is a tax expert.
We thank the Standing Committee on Finance for allowing the UPA to present the requests of Quebec farmers as part of the pre-budget consultations in advance of the 2019 budget
The UPA represents all Quebec agricultural businesses and producers. As you know, the agricultural sector is a major contributor to Canada's economic growth. However, government investments will be required to support the development of this sector and increase its rate of growth. Our presentation today is based on the brief we sent to you on August 3.
First, we will talk about safety nets for sustainable growth. When we talk about safety nets, we mean risk management programs for agricultural businesses. Those programs are the basis for growth in the agricultural sector. The insecurity related to the current market environment—including the concessions for the dairy sector made under the recent United States-Mexico-Canada agreement, but also the effects of tariffs being imposed, for example, between the United States and China, which significantly affect the price of pork and grains—justifies more than ever the need for business risk management programs that address the real risks faced by agricultural producers.
We would like to remind you that, since the implementation of risk management programs under the first agricultural policy framework in 2007, and the last year of growing forward 2 in 2017, program payments have decreased by 40%. Over that same period, farm cash receipts have increased by more than 60%.
These observations, shared by all stakeholders during the consultations surrounding the adoption of the latest strategic framework, the Canadian agricultural partnership, must be reflected in government policies and budgets.
We ask the federal government to provide access to risk management programs tailored to the needs of agricultural producers, to provide proportional increases to the budget of Agriculture and Agri-Food Canada, including the risk management program envelope, that reflect the growth of the agricultural sector. We also ask that it quickly put in place programs to fully compensate Canadian dairy producers following the concessions set out under the United States-Mexico-Canada Agreement, as announced by Prime Minister Justin Trudeau.
The second point we would like to present to you today is the harmful impact of amendments to the Income Tax Act on shareholders of private companies that do not have the status of agricultural cooperatives. Some agricultural businesses join forces to improve the marketing of their products by processing and distributing them, in order to deal with competition from the major players.
To do so, they become shareholders in a company whose marketing activities are similar to those of an agricultural cooperative. These groups are not created as a way to increase access to the small business deduction (SBD).
We are asking the federal government to allow these joint-stock agricultural companies to have access to the SBD on their sales made to the group, as is the case for sales made to an agricultural cooperative.
The third point also deals with risk management programs. The agricultural sector is taking proactive action on climate change—we are the first to experience it directly—and societal expectations. One of the winning conditions for sustained growth in agriculture and its benefits is adequate protection through risk management programs, as mentioned above. It is therefore essential that these programs be improved to address climate risks.
The response to natural disasters must be consistent across the country. In recent years, differences between provinces have created unfair competitive situations.
Societal expectations must also be met, which, for farmers, often means changing their practices and making additional investments. These expectations, which affect animal welfare, the use of inputs and the conservation of resources and the environment, are taken seriously by agricultural producers, even if meeting them requires significant investments.
Markets rarely reimburse such investments, however.
We are asking for the necessary funds to meet the producers' needs during natural disasters and to ensure that the programs put in place are uniformly applied; to fund projects and tools to improve the management of climate risks for farm businesses; and to support the necessary investments for adapting to societal expectations that significantly change practices, such as those related to animal welfare and the environment.
The last point is about the next generation of farmers, which affects all Canadian businesses. If we still want agriculture to exist, intergenerational transfer must be facilitated. We therefore ask the government to exclude from the anti-avoidance rule in section 84.1 of the Income Tax Act the transfer, under certain conditions, of a taxpayer's shares to his or her child or grandchild.
Finally, in the agricultural sector, the cost of assets is extremely high. The cost of land has become a major issue when it comes to transferring to the next generation. In 2016, the average value of the land held was $2.1 million per farm or 68% of total assets.
We therefore ask that the federal government take the following measures: ensure that risk management programs provide a sufficient safety net to allow the next generation to access the necessary funding; reduce participation costs and provide a higher rate of government contribution to risk management programs in the early years of operation; offer a refundable tax credit of 40% of the interest paid by the transferee to the transferor through a seller-lender agreement; and create incentives for financial institutions and governments to provide patient capital for next-generation farmers.
Thank you.