The Liberal government’s proposed capital gains tax changes take effect today Achi-News

OTTAWA – The Liberal government’s changes to capital gains taxation took effect Tuesday, despite significant pushback from business groups and doctors.

Finance Minister Chrystia Freeland’s spring budget proposed making two-thirds of capital gains — the profit made on the sale of assets such as a second residence or stocks — taxable, rather than one-half.

For individuals’ capital gains of $250,000 or less, the inclusion rate would remain the same, at 50 percent.

At a time when the Liberals are trying to win back young voters, Prime Minister Justin Trudeau has introduced the effective tax increase as a way to ensure generational fairness.

The Liberal government says the $19.4 billion it expects to raise over five years from the changes will help pay for housing and other priorities for young people.

Freeland introduced a single-handed motion on the changes, which easily passed the House of Commons earlier this month.

The NDP, Bloc Québécois and the Greens voted with the Liberals in favor of the proposal while the Conservatives, who had been silent on the tax changes until then, voted against it.

Conservative Leader Pierre Poilievre insisted that the rich will find ways to move their money out of Canada to avoid paying the tax, which will negatively affect farmers, small businesses, doctors and home builders.

The changes have sparked a backlash from business groups who say the higher inclusion rate will hurt the economy by reducing competition and innovation.

Physician groups have also spoken out against it, noting that many physicians have used their incorporated medical practices to invest and save for retirement.

But the Liberals have eliminated the opposition, arguing that only a small portion of wealthy Canadians will face a higher tax bill.

During a speech earlier this month, Freeland asked Canada’s richest about what kind of country they want to live in. The finance minister painted a bleak picture of the alternative to rising taxes and increased spending on health care and social services.

“Do you want to live in a country where those at the top live luxurious lives, but it has to be done in gated communities behind even higher fences using private health care and planes because the field public so degenerate and wrath that the vast majority of their less privileged countrymen burn so hot?” Freeland said.

Ottawa estimates that 0.13 per cent of Canadians would pay higher taxes on their capital gains in any given year.

To encourage entrepreneurship, the government is also offering the Canadian Entrepreneurs Incentive, which will reduce the inclusion rate to a third on a lifetime maximum of $2 million in eligible capital gains.

A statement from the International Monetary Fund on June 11, written by IMF staff after completing a regular visit to Canada, was quietly positive about the change in capital gains.

The preliminary final statement said the change “improves the neutrality of the tax system with respect to different types of capital income and is likely to have no significant impact on investment or productivity growth.”

This report was first published by The Canadian Press on June 25, 2024.

Canadian Press. All rights reserved.