The House of Commons passed a motion Tuesday that will bring forth legislation on proposed changes to capital gains tax measures, with 208 MPs voting in favour of and 118 voting against the motion.
Deputy Prime Minister Chrystia Freeland introduced the ways and means motion to Parliament on Monday, a 59-page document outlining draft legislation to increase the capital gains tax inclusion rate from 50 percent to 66 percent.
“Today’s announcement and the associated rhetoric from government reinforce that the proposed capital gains changes are about politics, not tax fairness.”
CFIB
The proposed changes were first introduced in the April budget, and the motion is the first step to tabling the bill, of which the government will release draft legislation in July with passage expected sometime in the fall. The tax rate changes, however, would apply beginning on June 25 to all capital gains realized by businesses, but for individuals the increased rate would apply to capital gains above $250,000.
Notably, measures for the Canadian Entrepreneurs’ Incentive were absent from the motion. Policy observers told BetaKit the omission might indicate that changes could be made to the program before legislation is introduced in July.
In excluding the capital gains measures from the budget implementation bill, the Liberals forced the Conservatives to vote separately on the motion and nearly all Conservative MPs, including leader Pierre Poilievre, voted nay.
“This job-killing Trudeau tax will drive billions of dollars of machines, technology, business and paycheques out of our country,” Poilievre said in a statement to The Globe and Mail before the vote.
The tech sector has been largely critical of the new changes, with Council of Canadian Innovators (CCI) president Ben Bergen saying the hikes are a tax on investment and innovation.
“If the federal government wanted to have a serious conversation about what tax fairness means, and strategies for increasing government revenue to support the public services we all value, we could have that conversation as a country. What we’re seeing from Minister Freeland is something else entirely,” Bergen said in a statement.
“We have passionate Canadian entrepreneurs, but we need government policies which create the best possible conditions for growth. We hope that Minister Freeland and her colleagues will start listening to the technologists who truly want to be the engine of prosperity for Canada,” he added.
CCI also penned an open letter calling on the government to scrap the new measures, with nearly 2,000 CEOs, business leaders, and industry stakeholders signing it.
The Liberals deem the tax hike as a matter of fairness to ensure millionaires aren’t paying a smaller share of taxes compared to middle-class workers like nurses and teachers. The budget projects the new measures would impact 0.13 percent of the population, or 40,000 people, and bring in $19.4 billion in revenue over five years.
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On Monday, the Canadian Federation of Independent Business said it was disappointed the government didn’t make any amendments to the proposed increase.
“Today’s announcement and the associated rhetoric from government reinforce that the proposed capital gains changes are about politics, not tax fairness,” the CFIB said in a statement.
In the budget, the government also hiked the lifetime capital gains exemption from $1 million to $1.25 million. Entrepreneurs will be able to take advantage of the hike in combination with the newly proposed Canadian Entrepreneurs’ Incentive, which reduces the inclusion rate to 33.3 percent on a lifetime maximum of $2 million in eligible capital gains (increasing by $200,000 each year, starting in 2025, until it reaches $2 million in 2034).
With the increased lifetime capital gains exemption, entrepreneurs will have a combined exemption of at least $3.25 million when selling all or part of a business, according to the budget. The new incentive program was excluded in the motion MPs voted on but will be included in July’s draft legislation.
Feature image courtesy Wikimedia Commons under CC BY 4.0.
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