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OTTAWA -- MPs on the House of Commons finance committee have heard a plea from the country's farmers that the government's plans to rewrite tax laws shouldn't make it difficult, again, to pass the family farm from parents to children.

Farmers and small business owners have for years asked the government to address an inequity in federal law that saw hundreds of thousands in extra taxes heaped on families that wanted to sell their company to another generation of owners.

A Conservative private member's bill passed last month rewrote part of the Income Tax Act so business owners could pass on companies to their children or relatives at the same tax rate as if they were selling to a stranger.

The Liberals now say they plan to rewrite parts of the new rules to deal with potential loopholes that could lead to tax evasion.

Speaking to a House of Commons committee Tuesday, Mary Robinson, a P.E.I. farmer and president of the Canadian Federation of Agriculture, urged MPs to make sure the Liberals' promised amendments wouldn't reintroduce the tax inequities that the bill, known as C-208, addressed.

"We believe the targets for future amendments can be addressed while maintaining this access for Canadian farm families. However, we believe this can only be assured through dialogue with farmers and farm advisers," Robinson said.

"The potential for unintended barriers is significant unless informed by those with direct experiencing managing farm succession and financial planning."

First announced last month, the government's plan to do its own rewrite of the tax laws created a heap of confusion, drew the ire of Conservative MPs, and ultimately led to Tuesday's rare summer meeting of the finance committee.

One day after the bill got parliamentary approval, the Finance Department announced the government would introduce amendments and apply the rules on family business sales starting Jan. 1, 2022.

Business groups expressed concern that the department was delaying implementing the new rules that left owners and families caught up in a legislative limbo.

Parliamentary law clerk Philippe Dufresne told the finance committee that the bill officially became law when it received royal assent in late June even though it didn't contain a specific coming-into-force date.

He said the government's announcement of a possible delay was surprising and unseen in modern history. He noted it is more common to see the government apply proposed tax rules before they become law on the assumption that they'll gain parliamentary approval.

Liberals and Finance officials told MPs that there was nothing out of the ordinary in what the government announced, although it might have just been misunderstood.

They pointed to a statement Monday evening from Finance Minister Chrystia Freeland that said C-208 was the law of the land.

The Canadian Chamber of Commerce, the Canadian Federation of Independent Business and the Canadian Federation of Agriculture voiced their pleasure that government had cleared up confusion and would help with succession planning.

Freeland's statement, hours before the committee meeting, also signalled the government's plan to introduce amendments to close loopholes that could help people avoid paying taxes.

She cited the possibility of converting dividends to capital gains to take advantage of the lower tax rate without any actual transfer of the business between family members.

Any changes would apply no earlier than Nov. 1.

"As finance minister, it's my job to be sure everyone in Canada pays their fair share, and to close loopholes which permit tax evasion," Freeland told reporters in Longueuil, Que.

"What we will do is consult widely with stakeholders, publish some draft legislation, some draft amendments to C-208 designed to close those loopholes."

Opposition parties noted during the committee hearing that the government could have proposed amendments to C-208 while it was being debated, and argued Freeland's stance now was spurred by a parliamentary hearing on the matter.

The committee also decided to invite Freeland to testify before the committee on the issue within the next two weeks.

This report by The Canadian Press was first published July 20, 2021.

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Liberals, MPs urged not to unwind easing of tax rules on sale of family businesses - CTV News