Canada’s Conservative Party is poised to dismantle the Liberal government’s controversial capital gains tax increase, should they gain power in the next federal election. This move, spearheaded by Conservative leader Pierre Poilievre, aims to alleviate economic strain on businesses and individuals, as concerns mount over job losses and reduced investment.
In a decisive announcement on social media platform X, Conservative leader Pierre Poilievre declared, “I am announcing today common sense Conservatives will reverse last June’s Liberal tax hike on capital gains—a tax economists agree will kill 400,000 jobs.”
Poilievre criticized the Liberal measure as detrimental to various sectors, stating, “Cancel Trudeau’s job-killing tax hike on health care, homes, farms, and small business.”
The Conservative Party formally requested Finance Minister Dominic LeBlanc to halt the collection of the increased capital gains tax, arguing that the legislation was never fully approved by Parliament. “You have a responsibility to stop this job-killing tax hike before it does even more damage to our economy,” the party’s lawmakers emphasized in their letter to LeBlanc.
The Liberal government’s capital gains tax, implemented in late June 2024, raised the taxable portion of capital gains from 50% to 66.67% for individuals earning over $250,000 annually. The policy aimed to generate approximately $19.3 billion over five years to fund initiatives addressing housing affordability and supporting younger Canadians. However, the government has failed to pass legislation to actually bring the changes into law, with the Canada Revenue Agency instead electing to proceed with the proposed changes, under the assumption that legislation will be passed.
Poilievre highlighted the adverse effects on critical sectors: “Trudeau is hiking taxes on homebuilding during a housing shortage, hiking taxes on doctors during a doctor shortage. He’s hiking taxes again on farmers during a food cost crisis. And he’s hiking taxes on small business while Canadians’ paycheques are shrinking.”
Business leaders have echoed these sentiments, expressing concerns over reduced investment and hindered growth. Dan Kelly, President of the Canadian Federation of Independent Busines, stated, “Canadians and Canadian business owners need and deserve as much clarity and confidence as possible at this challenging time.”
The capital gains tax increase has faced significant opposition from the business community and economic experts. The C.D. Howe Institute, a prominent think tank advocating for business-friendly policies, released a report predicting that the tax hike would only generate approximately $3.3 billion over five years, far below the government’s estimate of $8.8 billion.
Alexandre Laurin and Nicholas Dahir, authors of the study, noted, “These three very different estimates underline the complexity of projecting revenue gains from these tax changes and emphasize the projections’ dependence on crucial yet uncertain assumptions.”
Further skepticism comes from the Parliamentary Budget Officer, who independently projected an additional $5.8 billion in personal income tax revenue, still falling short of the Liberal government’s targets. This discrepancy has intensified debates over the efficacy and economic impact of the tax increase.
The Conservative Party’s challenge comes at a tumultuous time for the Liberal government. Prime Minister Justin Trudeau recently stepped down as leader, remaining in office until a new leader is chosen on March 9. With Parliament prorogued until March 24, legislative progress is stalled, and the capital gains tax proposal remains uncertain.
Public opinion strongly favors the Conservatives, who hold a lead of 20 to 25 percentage points over the Liberals in recent polls. Analysts predict an imminent election, potentially as early as spring, with most political observers anticipating the Conservatives to form the next government.
The prorogation of Parliament has left taxpayers and businesses in a state of uncertainty. Jamie Golombek, Managing Director of Tax and Estate Planning at CIBC Private Wealth, explained the predicament: “People are now going to be in a position to file a 2024 tax return, and they don’t know what to do because we don’t have legislation that has been passed by Parliament.”
The Canada Revenue Agencyhas yet to provide clear guidance on whether it will continue to collect taxes under the proposed changes, adding to the confusion.
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