Achi news desk-
Business groups are warning Finance Minister Chrystia Freeland that increasing Canada’s capital gains inclusion rate will have “significant impacts” if implemented with possible “irreversible consequences.”
Six of the country’s largest industrial organizations wrote in an open letter to Freeland on Thursday that the proposed increase would delay economic growth and come at the expense of future generations.
“Simply put, this measure will limit opportunities for all generations and make Canada a less competitive and less innovative nation,” the letter said.
“While this proposed measure attempts to provide a solution to Canada’s deficit, it is short-sighted and complex, and it is divisive at a time when we need a Team Canada approach to economic growth.”
The letter was signed by the heads of the Canadian Chamber of Commerce, the Canadian Federation of Independent Business, Canadian Manufacturers and Exporters, the Canadian Venture Capital and Private Equity Association (CVCA), the Canadian Franchise Association and the Canadian Canola Growers Association.
Freeland submitted the federal government’s 2024 budget on April 16, which included a proposal to raise the inclusion rate – the portion of capital gains on which tax is paid – to 66.7%. For individuals realizing more than $250,000 in capital gains per year.
The email you need for today’s top news from Canada and around the world.
The changes will also apply to all annual capital gains filed by corporations and trusts.
Although not included in the budget implementation bill, Freeland told reporters on April 30 that legislation for capital gains tax changes is still coming, and the Liberals are committed to implementing it by the planned June 25 budget date.
“We are very committed to the capital gains measures that we proposed in the budget,” she said during a news conference in Ottawa.
Part of Budget 2024 aims to address Canada’s growing productivity crisis by providing additional support to businesses. The letter from the business groups states that there are positive steps in the budget that will help small businesses, such as increasing the lifetime capital gains exemption to $1.25 million. But raising the inclusion rate to nearly 67 percent on certain capital gains is “of great concern” to “Canada’s business community.”
“At a time when we are already urgently struggling to reignite our nation’s lagging productivity, increasing taxes on productive investment and reducing Canadian potential will have profound, long-term and potentially irreversible consequences,” it said.
Freeland and Treasury officials cited the move as a change to make taxation more equitable.
But Freeland’s assertion that the tax change will affect only a small number of wealthy Canadians is “misleading,” the letter said.
“The effects of this tax increase will be borne by all Canadians, directly or indirectly,” it said.
The groups add that the tax change will have “significant effects” felt throughout the country, including limiting the creation of new companies and jobs, preventing the growth of multi-generational businesses and reducing the availability of health care providers.
Doctors and medical associations began raising red flags about the increase in capital gains shortly after the budget was tabled, arguing it could affect the recruitment and retention of doctors in Canada.
Freeland, asked whether doctors should be exempt from the proposed changes at an event to promote the 2024 budget last month, focused on the high bar for people who pay more on their capital gains.
“It’s fair to ask those who are really successful to contribute a little more,” she told reporters at the time.
Budget 2024 ultimately promises fairness for every generation, but the letter released Thursday argues that increasing the capital gains inclusion rate will achieve the opposite.
“Generational fairness must consider the actions we take today at the expense of our future prosperity,” the letter said.
“At this important juncture, Canadians should be united around a common goal: increasing Canada’s economic opportunity.”
— with files from Global News’ Craig Lord and Sean Perville
© 2024 Global News, a division of Corus Entertainment Inc.
