Freeland Introduces Capital Gains Proposal in Parliament

Freeland Introduces Capital Gains Proposal in Parliament
Deputy Prime Minister and Minister of Finance Chrystia Freeland responds to a question during a weekly news conference in Ottawa on Feb. 27, 2024. (The Canadian Press/Adrian Wyld)
Matthew Horwood
6/10/2024
Updated:
6/10/2024
0:00

Deputy Prime Minister and Minister of FInance Chrystia Freeland tabled a ways and means motion in the House of Commons on June 10 as part of the Liberal government’s upcoming legislation to increase the capital gains tax.

Ms. Freeland said the changes to the tax regime, which will be effective June 25, is a more “fiscally responsible” approach than the government taking on more debt.

“Canada could finance these critical investments by taking on more debt, but that would place an unfair burden on younger generations,” Ms. Freeland said during a June 10 press conference. “Fiscal responsibility matters.”

A ways and means motion is the first step to complete before tax change legislation can be tabled. The motion is expected to be voted on later next week.

The government announced its plan in April’s 2024 budget to tax Canadian companies on 66.7 percent of their realized capital gains, up from the current 50 percent. Individuals will pay tax on 50 percent of the first $250,000 of capital gains earned in the year, but 66.7 percent of any gain above that threshold under the new system.

The Liberals later separated the proposed change from its budget implementation legislation, promising to introduce it as a separate bill at a later date.

The way investment gains are currently taxed means “well-off” Canadians who make money through investments can end up paying a lower marginal tax rate than those who earn incomes, such as nurses or plumbers, Ms. Freeland said. “That’s not fairness. That’s favouritism,” she added.

The proposed tax change would not apply to Canadians selling their first home, the finance minister said, adding that the Lifetime Capital Gains Exemption for Canadians selling their small business or farm would be raised from $1 million to $1.25 million. Ms. Freeland estimated that only 0.13 percent of Canadians, who have an average annual income of $1.4 million, would be impacted by the capital gains tax change.

Opposition to Tax Increase

The proposed capital gains tax increase has proven to be controversial among business groups, with the Canadian Federation for Independent Business and the Canadian Chamber of Commerce telling Ms. Freeland in a May 9 letter that the change would “make Canada a less competitive and less innovative nation.”
The Canadian Medical Association has called the tax changes “detrimental” to doctors because it would cause a “retroactive increase in tax on the retirement savings of mid to late-career doctors” and deter new graduates considering community-based practice.

Ms. Freeland said the government takes Canada’s health care “very seriously,” saying it had made more than $200 billion in investments, increased student loan forgiveness for rural doctors and nurses by 50 percent, and introduced dental care and pharamacare plans.

She said the capital gains tax increase would bring in revenues of roughly $12 billion, which would be “a lot of additional revenue” for provinces and territories.

“I would invite Canadians who feel that our doctors should be paid more to suggest that provinces and territories should be using some of that revenue to increase the actual salaries, the rate of compensation for doctors,” she said.

Some Conservative MPs have accused the Liberals of delaying the specific start date for the tax increase to June 25 in order to generate a pre-election tax revenue boost. They have argued that Canadians will rush to sell stocks, vacation homes, businesses and other equity ahead of the deadline.

Conservative MP Philip Lawrence told a hearing of the House of Commons finance committee May 7 that the Liberals would need an additional $7 billion in revenue to fund their latest budget, and so they had “set up an artificial fire sale by saying the legislation goes into place on June 25.”

Conservative Leader Pierre Poilievre has not said whether he would vote in favour of the new legislation, with a spokesperson telling The Epoch Times last month that it was “impossible” to say whether the Conservative leader would vote in favour of a capital gains tax increase because the legislation “doesn’t exist yet.”

Ms. Freeland has previously called for Mr. Poilievre to clarify his position on the tax, and on June 10 she said Canadians should be “watching closely to see how all MPs vote on this.”