Backyard food growers pay tax on seeds — unlike big producers whose goods often travel far

Canada’s tax regime, which does not levy sales taxes on food no matter how far it has travelled before landing on Canadian store shelves, does impose sales taxes on seeds that people use to grow food in their own backyards. Some home growers say that compromises the federal government’s efforts to lower the country’s carbon footprint.

Expert says Canada's tax system works to discourage Canadians from growing food at home

Nicola Moore says it was the pandemic that triggered her interest in growing food.

"My parents have always had a garden my whole life," she said. "I never put two and two together until I had a family of my own. And then when we went through the pandemic, I think it was 2020, I got scared and I wasn't sure how I was going to feed my family breakfast, lunch and dinner every single day.

"And, you know, the grocery stores had long lines, and I just was not confident about that. So I thought, how can I help my family? And that was learning how to grow my own food."

Moore grows beets, beans, carrots, cucumbers, peas, radishes, lettuce, onions, peppers and tomatoes, both at home in Hamilton, Ont., and in a nearby community allotment.

"It's been two years of steady learning, gardening, researching, and now my next level is canning and preserving for the winter time."

Moore says the savings are significant. But they are also less than they could be, because both the seeds and the seedlings she buys to plant her garden are subject to provincial and federal sales tax while foods grown from the same seeds that may be imported to Canada, or trucked into cities over great distances, are not.

"When you look at our recent stats, it seems as though the gardening rate in Canada is at an all time high," said Sylvain Charlebois, scientific director of the Agri-Food Analytics Lab at Dalhousie University.

"People want to grow more food for a variety of reasons. One is to be proud of the food they grow. They want to do more for themselves. They want better quality. They want to reduce the carbon footprint of our food systems. But many, many citizens actually also want to grow food to save money."

The tax system, Charlebois says, works against them, because while a lettuce imported from California and sold at the supermarket is not saddled with sales tax, a baby lettuce grown in Canada for planting in a home garden is taxed.

Canada's carbon tax may not be popular in all quarters, but it does penalize those who have a larger carbon footprint, while rewarding behaviours that shrinks it.

But Canada's sales tax regime on food does the opposite, offering tax benefits to those who have a larger footprint, while taxing those who reduce it, creating what economists call a "perverse incentive" that works at cross purposes to the carbon tax.

Depending on trucks

Canada depends heavily on fruit and vegetables imported from outside the country at considerable environmental cost.

"The carbon footprint is quite significant," said Charlebois. "This is the way we feed ourselves. We truck things in."

Canada's climate makes it hard to replace all of the food coming from places like California and Mexico, but Charlebois says skilled growers can time their plantings and harvesting to have different foods ripen at different times of spring, summer and fall.

"There's no carbon footprint when I am going over to my garden and putting the seeds in," said Moore. "Imagine a truck or trucks or fleets driving from California over to Ontario."

Most Canadians rely on supermarkets and grocery stores year round. Even in the summer months, when much of the produce is from Canada, it still comes from commercial growers using fertilizers that emit large amounts of nitrous oxide. Agriculture accounts for about a tenth of Canada's total emissions, and much of the food is trucked over long distances.

Studies have shown that food consumed in North America travels an average of over 1,500 km before reaching a dinner plate.

Food inflation, shorter shelf life

Recent supply-chain issues have driven fruit and vegetable prices up by about 10% in a year, three times faster than hourly wage growth. Supply chain delays have also caused the less well-known phenomenon of "shelf-lation".

"A lot of products that end up at the grocery store are not as fresh as they used to be," said Charlebois. "You'll buy onions, carrots, and tomatoes that are a bit softer than usual. And instead of having seven days to eat certain produce, you only have two days. And if you don't eat it, you have to throw it away."

"It's been happening more often since the start of COVID due to labour issues, COVID restrictions and things like that. To move anything on water or land is taking more time, and that leads to more waste."

As a grower who raises plants specifically for seed, Catherine Wallenburg has seen the growth in interest in planting gardens.

At her greenhouse in Farrellton, Quebec, she lets lettuces, kale, and other plants go to seed, and then winnows and cleans them to sell under her Northern Seeds label.

"When I started the retail business, and I looked into how the product worked, I was quite surprised, actually, to find out that it was a taxable product. To me, it just seems to say that it's considered a hobby to grow food, because the same produce, once grown out, would not be taxed."

At least one province, British Columbia, does not charge tax on either seeds or plant stock.

The federal government has removed sales tax in recent years on both feminine hygiene products, and on face-masks, but says it has no plans to change the tax regime around food.

A high threshold

"Farmers do not pay the GST on a list of selected major items used in their farming activities, including bulk purchases of seeds used in the production of food," Adrienne Vaupshas of the Department of Finance told CBC News.

The federal tax on seeds only exempts farmers who buy in commercial quantities (at least 2,500 small seeds like lettuce, or 5 kgs of larger seeds like beans or corn). "That's a pretty high bar," says Wallenburg. "Even some people who are producers, who are market gardeners, for instance, won't meet that threshold. So they may end up paying taxes for seeds."

Market gardeners can claim those taxes back at the end of the year, but Wallenburg's customers can't.

"It's a shame that it's not incentivized to be growing and eating more local, and there isn't really more local than straight from your garden."

Many reasons to grow

Moore says she grows food for reasons that go beyond cost.

"I feel like getting your children involved in the process is an excellent way to teach them from seed to produce how your food actually grows. A lot of our children today will go to the grocery store, they'll grab an apple or a peach, and they have no idea it came from a tree."

Wallenburg says her customers have similar motivations: "Because it's tasty, because it saves you money, because it's an enjoyable thing to do outside with kids."

A tax system that discriminates against home growers isn't likely to change that equation for most, but Charlebois says the system could go beyond just eliminating unfairness and actually encourage people to do something that is good for the environment, for their health, and even for the country's food security and balance of trade.

"From a fiscal policy perspective, I'm not sure we've done a good job making sure that there is some coherence across the board here."

"The fascination of recent years has been to use tax to prevent behaviours, but we've never actually thought of taxation as a tool to empower citizens to do certain things that are desirable, like growing food, like actually making more food at home."

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