Maguire’s bill passes House of Commons
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This article was published 15/05/2021 (451 days ago), so information in it may no longer be current.
A Westman Member of Parliament is heralding his bill passing in the House of Commons as a way to level to playing field for people wanting to sell their small business.
The private member’s bill from Brandon-Souris Conservative MP Larry Maguire would reduce taxes for people selling a farm — or any other small business — to a family member.
The bill passed a vote in the House of Commons by a vote of 199 in favour and 128 against and now goes to the Senate before becoming law.
“It levels the playing field for families who want to sell their qualify small businesses to their direct son or daughter — their kids or their grandchildren,” Maguire said.
Currently, when someone sells a business to a family member the profits are deemed to be a dividend, which are taxed by the Canadian Revenue Agency at a higher rate than if the business was sold to a stranger. If sold to a stranger or third-party, the owner can use the capital gains exemption to lower how much tax they pay.
“There are hundreds of thousands of dollars involved, which is usually the retirement package for the parents of the small business that have put all the profits back into it over the years,” Maguire said.
“These dollars for the most part will stay in the local community they’re in or very nearby.”
In one example, a farmer could sell their farm to a third party, which would let them use their $1 million farm capital gain exemption on the sale and to get a 13.39 per cent tax rate, Maguire previously told the Sun.
On the other hand, selling to a direct family member would result in the farmer saying a 47.4 per cent tax rate.
The bill does not apply to large businesses, only those defined as small businesses under law, Maguire said.
“There’s a lot of pride involved too in making sure you’ve got a business the next generation can take over, but this makes it practical because it doesn’t put them at a disadvantage to selling to a complete stranger.
Keystone Agricultural Producers president Bill Campbell said it was “positive news” the bill made it through the House of Commons. He said it puts all types of farm succession on a level playing field financially.
It’s also a matter of carrying on family knowledge and tradition of a property from previous generations of farming, he said.
“I think it’s extremely significant that we aim to do that. … If the family succession is successful, those people stay in the community, they contribute to the community and the economy.
“We see declining rural population happening and this will hopefully help strengthen our rural communities.”
It’s not just about the tax implications of the bill, Campbell said. It’s also about maintaining the heritage and other factors that can’t be measured in terms of taxation.
“There’s that sense of pride in the community and continuity and some of those things,” he said. “That needs to be addressed.”
Jill Verwey, the executive vice president of Keystone Agricultural Producers, said there are small margins in farming, and the reduced tax burden on selling to family members could help farmers keep their kids involved in the process.
“As the average age of farmers increases, there’s a large number of farmers that are in a position where we’re actually going to be retiring and we want to be able to pass that on to the next generation,” said Verwey, who maintains a family farm near Portage la Prairie. “I think we take great pride in being able to pass out family business on to the next generation.”
According to openparliament.ca, a mix of MPs from all parties voted in favour of the bill.
Maguire said the Senate could discuss and vote on his bill in late May or early June.
» email@example.com, with files from Tyler Clarke.