Report suggests alternatives to county feedlot tax

By Geoff Smith (@GeoffSmithLNN on Twitter)
November 2, 2017 - 10:41am

LETHBRIDGE - Lethbridge County's business tax on feedlots is coming under criticism in a new report from the University of Calgary's School of Public Policy.

The tax, implemented in 2016 as a way to help pay for road maintenance, is based on the livestock storage capacity of a confined feeding operation, rather than its actual production volume. The report argues this increases an operation's fixed costs by as much as 20 per cent of average operating margin, and may lead to fewer feedlots in the long-term.

Report co-author, professor emeritus Melville McMillan noted the county has been providing some concessions to feedlots operating well below their capacity. He also noted the tax's effect varies based on an operator's production level.

It makes the argument that it would be difficult to shift the burden of the tax to feed or feeder cattle producers or beef producers, because there are too many other factors affecting prices.

"Even though the feedlot industry is a big industry within the county, there are options for the supplier to those industries of the cattle, of the feed to go elsewhere," he explained.

The report's authors propose three alternatives. One is a GPS-based system to assess trucking companies based on their road usage. Another is a usage levy based on a feedlot's capacity and distance from a highway. The third would tax a feedlot based on the amount of feed it imports.

McMillan said a user fee on trucking companies would likely have to be done with the province's involvement.

"It's something that, there are economies of scale, obviously, and there are likely legal factors as well," he said. "But to get it to operate effectively it would be an advantage if it were operated, say, at the provincial level." He added it could be done on an experimental basis, at first.

McMillan said while it appears to be true the feedlots create a burden on county roads, the question is also whether they are contributing their fair share to the tax base, especially those that do not also have agricultural land as part of their operation.

According to the report, feedlots in Lethbridge County account for more than one third of the province's fed cattle.

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