FOR IMMEDIATE RELEASE Monday, Sept. 25th, 2017
The Federation of Independent Sea Harvesters of Newfoundland and Labrador (FISH-NL) says proposed federal tax changes will negatively impact many inshore harvesters when they sell out.
“Harvesters do not have pension plans so the money from the sale of their licence is their retirement plan,” says Ryan Cleary, President of FISH-NL. “The changes to capital gains will mean many inshore harvesters will have less to live on in their retirement years, which may actually drive up the cost of fishing licences.”
The proposed Liberal tax changes will impact small businesses, which obviously includes inshore harvesters/enterprise owners, but mostly those in higher income brackets earning more than $150,000 a year.
Most inshore harvesters don’t make that much, but with the average age of fishermen close to 60, many of them will be looking at selling out in the next few years, and the changes to capital gains — as part of proposed Liberal tax changes — will impact them then.
A fishing enterprise and licence could sell anywhere from $200,000 to well over $1 million, depending on what species are involved. The majority of inshore harvesters have formed their own companies, and proposed Liberal tax changes would limit a corporation’s ability to fully realize the benefits of having capital gains income and certain dividends.
Unlike most other taxes, capital gains are incurred only when a person sells an asset (a fishing licence/enterprise, for example). Capital gains taxes are applied to the sale of an asset when its sales price is nominally (not adjusted for inflation) above its purchase price.
The Tax Act currently provides an exemption of the first $1 million of capital gains realized on the sale of qualified farm and fishing property, but the proposed changes would restrict the ability to claim the lifetime capital gains exemption to many family business owners who have undertaken typical estate planning transactions.
“Accountants say there’s concern that the changes to capital gains could actually drive up the price of a fishing licence as harvesters try to offset the bigger hit they’ll take on their taxes,” said Cleary, who’s calling on the federal Liberals to revisit changes to capital gains.
The Liberal government introduced the proposed tax changes in July, but a 75-day consultation period ends Oct. 2nd.