Although the matter is far from resolved, some 1,760 Canadian campgrounds received welcome news in December when it was learned government officials are recommending to address the concerns of small campgrounds questioned eligibility for the small business tax deduction in the next budget.
It’s a somewhat complicated matter, but basically earlier this year CRA decided campgrounds with fewer than five full-time employees may no longer qualify for the small business tax deduction. This sudden change in interpretation by CRA would increase the potential tax burden to a campground from about 15% to 48%-52%.
Several campgrounds have already been affected. A campground owner in southwestern Ontario received a collection letter stating he owed $250,000 in re-assessed taxes. Another campground owner was told he owed an additional $36,000, plus $250 per month in interest charges.
However, on Dec. 7 it was announced that rescinding CRA’s decision on campground taxation was one of 80 recommendations being forwarded to Minister of Finance Bill Morneau, who ultimately will decide the matter when he issues a final budget in February or March of 2017.
Among others, the Canadian Camping and RV Council (CCRVC), the RV Dealers Association of Canada, the Canadian RV Association, the Canadian RV Rental Association and Camping in Ontario have rallied to lobby CRA to maintain the same interpretation as before.
CCRVC Executive Director Shane Devenish, who noted that 75% of its 2,347 member campgrounds could be affected by CRA’s decision, recently took time to answer some questions from RVBusiness/Woodall’s Campground Management about the matter.
RVB/WCM: Let’s start with the most recent news, that rescinding CRA’s decision on campground taxation was one of 80 recommendations being forwarded to the minister of finance. That had to be welcome news?
Devenish: It’s another encouraging sign that we were included as a recommendation for the minister of finance to fix this for campgrounds, but by no means is this the end of it. It was a big thing, but it doesn’t guarantee us success. Now it’s one of about 80 recommendations, and not all of them can get into the budget. So we have to put some pressure on the ministry of finance that this gets included in next year’s budget. Once it does, then we’ll be successful.
RVB/WCM: So tell us what happened last week.
Devenish: We met with policymakers from the ministry of finance at their office just outside Parliament Hill, which is our equivalent to your Capitol Hill. We also met with a number of MPs (Members of Parliament) from both opposition and in-power parties in the parliament buildings.
While we were there on Wednesday afternoon the finance committee chairman presented the finance committee’s report to the House of Commons. Later that night we learned that the committee included us in the 80 recommendations they sent to the minister of finance. If the minister includes it in his final budget, CRA’s arbitrary analysis would be taken away and campgrounds would be included as an active business, automatically qualifying them for the small business tax deduction.
It was fortunate because the one lead guy on the committee has a sister with a park model RV and campground, so he was asking very pointed questions about what a park model is versus a mobile home. Part of the problem is we’re being painted with a similar brush, if not the exact same brush, as a mobile home park owner, which doesn’t get the small business tax deduction. So we have to make the point that campgrounds are not mobile home parks, starting with the fact that mobile home parks are open all year whereas campgrounds are only open six months.
RVB/WCM: You mentioned part of the problem was that the issue presented itself just after elections, and many of the players had changed.
Devenish: Everybody was new. Our prime minister was new and all of his MPs were new, with very little experience. And he had to assign titles to everybody. All that had to be done.
RVB/WCM: Besides not initially knowing whom to lobby, what have been some of the other frustrations?
Devenish: The most frustrating thing was just to find out why this was even happening. We were never told why. Campgrounds have been eligible for the small business tax for years. All of a sudden CRA, on their own, is saying you don’t qualify anymore and now we’re going to re-assess you at 50%. So we were asking why.
We met with CRA in June and they were basically on a fact-finding mission. They said they would get back to us with what their policy position was, and so far they never have. So it’s been frustrating meeting with everybody without knowing why they did it in the first place.
Another part of the frustration is some of the people in the Ministry of Finance office are saying, ‘Well, if it’s been like this all along and now all of a sudden CRA is looking at it in a different way, you guys should talk to CRA about it.’ And we’re saying ‘We’ve tried.’ We had meetings with them, but nobody there is telling us anything. We pointed out that nothing has changed and they are not following proper policy. We have to prove that because if we prove it to them then they will realize that one of their divisions is not doing their job correctly.
RVB/WCM: As we understand it, simply having five full-time employees would qualify you for the small business tax distinction and its lower tax rate. Why not just hire the additional people to meet that threshold?
Devenish: The bottom line is, needing a minimum of five employees is absolutely asinine. You can have one campground with four full-time employees performing all the necessary services and another campground with five employees doing the same services, and the CRA would rule that one qualifies for the small business tax but not the other.
Campgrounds with less than five employees will obviously have to consider that, but we’ve done a study showing campgrounds in Canada are on average only open 167 days a year. Since 75% of our campgrounds have less than five full-time employees, for them to hire another one or two employees to reach that five-person minimum and pay them for doing nothing six months of the year — when they really don’t have a lot of money to begin with — doesn’t make a whole lot of sense. There are a lot of campground owners who need another job to make ends meet over the winter up here.
RVB/WCM: You say you’re not out of the woods yet?
Devenish: I’d say we’re two-thirds there, but probably our heaviest push is what remains. Now we need to actually have the minister of finance have this included in next year’s budget. Two of the three targeted campgrounds have already lost their appeal, so if this is not in next year’s budget then the CRA can target 75% of our campgrounds.
RVB/WCM: So what are you asking people to do?
Devenish: What we’re trying to do is get everybody in the industry — campgrounds, manufacturers, dealers and campers — to call their MPs and have them exert pressure on the minister of finance to have this included in next year’s budget. Now that we are close, we have to keep it fresh on his mind to get it done. Having that committee recommendation helps for sure, but now we have to pressure him into following through on that recommendation.
Everyone has been sending letters to the minister of finance up to now, and we want that to continue, but I don’t even know if he’s even seeing these letters. So we’d like people to call their MP’s and say ‘Hey, I’m a campground owner in your area. I’ve got a hundred campsites and we really affect the economy. Next time you see the minister, we really need you to bug him about this.’ The same for RV dealers, manufacturers, suppliers and campers; they need to call their MP’s.