Taxes and red tape stunt agriculture’s growth

Catherine Swift

Have you ever thought about how important the agricultural sector is to your own business, not to mention your family, community and the Canadian economy?

According to a survey by the Canadian Federation of Independent Business (CFIB), two-thirds of our members believe that a healthy agricultural sector is very important to the success of running a business. In another poll, conducted online by Ipsos-Reid, farmers and small business owners are the most respected groups in the country. Canadians, it seems, recognize the important contribution farmers make to the economy, society and local communities.

This is confirmed by an Agriculture and Agri-Food Canada (AAFC) statistic indicating that the Canadian agriculture and agrifood system employs nearly 2.2 million people—that’s one in eight jobs! In 2008, this sector represented 8.1% of the total Canadian gross domestic product, never mind the fact that Canadian farmers produce some of the highest-quality and safest food in the world.

You may be surprised to learn, however, that farmers face many competitive challenges and impediments to growth. Each month, CFIB surveys our members on their level of business optimism for the year ahead. And while there have been slight improvements in optimism at the farm gate, this sector continues to lag behind both the national average and other business sectors. So what is the solution?

While governments cannot solve many of the global challenges that impact the agricultural sector, they can certainly take steps to improve the tax and regulatory environment in which agribusiness owners operate. The agricultural sector is an exciting and ever-changing industry, but more must be done to foster a competitive business environment for agribusiness owners.

Let’s be clear: Food safety is of utmost importance to farmers, but overregulation is stifling innovation. The CFIB has estimated the cost of regulation to the Canadian economy at about $30 billion, and agriculture is certainly not immune to this burden of red tape. In fact, the average agribusiness spends $19,000 per year to comply with the Canadian Food Inspection Agency. And this is in addition to all the other regulations they must comply with at the provincial, federal and municipal levels (GST, Statistics Canada, land-use bylaws, environmental regulations, etc.). Regulations and taxes are levied on farmers and small businesses as if each business had legions of employees and the deep pockets of a global conglomerate—a far-from-accurate state of affairs.

On the tax side, government could consider several measures to encourage innovation. Agriculture is a technology-driven industry, and agribusiness owners must make significant annual investments in equipment to stay competitive. In a CFIB study, it was found that agricultural businesses are almost twice as likely to have made major investments in energy conservation than those in other sectors. It is clear that the agriculture sector must adapt quickly to the ever-changing climate of government regulations and technological advancements.

Government should increase the capital cost allowances for agricultural equipment. This would help Canadian farmers to compete with U.S. producers, assist them in keeping up with major technological advancements, and help improve profitability. This has already been done to stimulate investment in the manufacturing sector, and could be easily replicated in the agricultural sector.

Finally, and probably most importantly, government must address the very big train coming down the track: farm succession. Based on a survey of farm members across the country, 27% of CFIB’s agribusiness owners plan to exit their businesses in the next five years. According to AAFC, between 2001 and 2006, over 61,000 farms exited the industry, while only 43,000 entered into it. The questions are: Who will become the next generation of agricultural entrepreneurs? Who will produce our food in the decades to come? These are extremely important questions that all Canadians should be concerned with.

So, next time you’re visiting your local farmers’ market, buying fresh bread from your neighbourhood bakery, or barbecuing that T-bone, think about the time and care that went into producing that product. And next time you hear about a policy that is bad for farmers and agribusinesses, pay attention—a lot is riding on the success of our agricultural sector.

Special to The Globe and Mail

Catherine Swift is president and CEO of the Canadian Federation of Independent Business. CFIB represents 105,000 small and medium-sized businesses in Canada, including 7,200 agribusiness members.

This column originally appeared in the September, 2010 issue of Your Business magazine.