Thank you very much, Mr. Chair.
As the chair already said, I represent Farmers of North America, or FNA, as we call it.
FNA is a Canadian national farmers' business alliance. Its mission is to develop tools and products for farmers to maximize their profitability. It's considered a private sector solution provider in that respect.
I am not here today to ask the government for any money. I am here simply to ask for a cost-neutral rule change that will remove a disincentive for farmers to use their own money to invest in agriculture. I'll explain that rule change, and I'll try to do it as quickly and as simply as I can.
This request is supported by the Canadian Federation of Agriculture, as well. In fact, if we could accomplish or achieve this rule change, it would free up a potential $900 million of farmers' money for them to invest in their own futures.
You've all heard of the suite of business risk management programs that are funded by both levels of government. You've no doubt heard about agri-stability, agri-risk, and agri-invest. I want to talk about agri-invest.
Agri-invest is the business risk management tier at the top, which is meant to help farmers manage slight reductions in income. That tier is jointly funded by farmers and by both levels of government. Farmers can contribute 1% of their eligible net sales, and that is then matched by the provincial and the federal governments. They together match that 1%, and then that money is put into an account. That money is then meant to be used for farmers to manage slight reductions in income.
The definition of agri-invest is that it's a fund for farmers to manage slight reductions in income and/or invest to reduce future income reductions or to maximize future revenue. It's achieving the first objective really well, and that is to create a small rainy-day fund, as I've said several times, for farmers to manage slight reductions in their incomes. However, it's not doing very well at achieving the second one, which is for farmers to invest to maximize future revenue. I'll tell you why.
When farmers contribute to that fund, their contribution is in after-tax dollars, so that goes into fund one. The government contribution goes into fund two. You have fund one and fund two. When you withdraw from fund two, because that's a government contribution, it's taxable. When farmers withdraw from fund one, it's non-taxable because it's a contribution made after tax.
The rules currently state that a farmer has to withdraw all of fund two, the taxable amount first, before they have access to fund one. That discourages farmers when they are at their best time to invest because they're in a fairly high tax bracket. At that same time, it also discourages them from withdrawing from fund two because fund two is taxable.
What we're proposing is a simple rule change. Of course, most of you are familiar with how farmers can currently do their tax returns. They can still file cash tax returns, so farmers can do.... I know this is on the record, so I'll be careful what I say, but farmers do have some choice as to when they pay taxes and what tax bracket they're in. We know already that farmers will not withdraw from fund two unless they find themselves in a year where they're in a very low tax bracket. Otherwise, they'll keep the money there.
What we're proposing is that when farmers invest in an eligible project—and eligibility criteria could be determined by the department together with the industry—and withdraw money to invest in an eligible project, they can withdraw from fund one without touching fund two. Now you can achieve the twin objectives of the program. You still have fund two as your rainy-day fund to manage slight reductions in income, and farmers have access to fund one and you've removed the disincentive for them to invest in projects to maximize future revenue.
We are confident that it is a cost-neutral rule change.
We need help on this one with finance officials because they, for some reason, are not convinced that it's cost neutral. We're convinced that it's cost neutral because farmers will leave fund two intact if they're in a taxable bracket. We're not suggesting to change the tax rules on fund two. The tax rules will still stay the same. If it's withdrawn, then the farmers pay taxes on it, and because of that, it's cost neutral.
With this rule change there's currently about $900 million in fund one in Canada. What we're simply requesting is a cost-neutral rule change that will remove the disincentive for farmers to have access to $900 million of their own money—this is their money—to invest in projects to maximize future revenue.
Thank you very much, Mr. Chair.