Changes in capital gains could have “irreversible” effects, business groups warn – National

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 repercussions.”

Six of the country’s largest industry organizations wrote in an open letter to Freeland on Thursday that the proposed increase will impede 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 sows division 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 Association Canadian Canola Producers.

Freeland presented the federal government’s 2024 budget on April 16, which included a proposal to increase the inclusion rate (the portion of capital gains on which taxes are paid) to 66.7 per cent. for people who earn more than $250,000 in capital gains annually.

The changes would also apply to all annual capital gains earned by corporations and trusts.

While not included in the budget implementation bill, Freeland told reporters on April 30 that legislation for capital gains tax changes is yet to come and that the Liberals are committed to implementing it. on the date scheduled in the budget for June 25.

“We are very committed to the capital gains measures that we put forward in the budget,” he 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 business groups’ letter says there are positive measures 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 per cent on some capital gains is “deeply concerning” for Canada’s “general business community.”

“At a time when we are already urgently struggling to revive our nation’s lagging productivity, raising taxes on productive investments and strangling Canadian potential will have profound, long-lasting and potentially irreversible repercussions,” he says.

Freeland and finance officials viewed the move as a change to make taxes more equitable.

But Freeland’s claim that the tax change will only affect a small number of the wealthiest Canadians is “misleading,” the letter says.

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“The effects of this tax increase will fall on all Canadians, directly or indirectly,” he says.

The groups add that the tax change will have significant “knock-on impacts” that will be felt across the country, including limiting new business and job creation, stifling the growth of multigenerational businesses, and reducing the availability of jobs. healthcare professionals.

Doctors and medical associations began raising alarm about the surge in capital gains shortly after the budget was presented, claiming it could affect the recruitment and retention of doctors in Canada.

Freeland, who was asked whether doctors should receive an exemption from the proposed changes at a Budget 2024 advocacy event last month, focused on the high bar for people who pay more for their capital gains.

“It’s fair to ask those who are doing very well to contribute a little more,” he told reporters at the time.

Ultimately, the 2024 budget promises justice for every generation, but the letter released Thursday argues that increasing the capital gains inclusion rate will achieve the opposite.

“Generational justice should consider the actions we are taking today at the expense of our future prosperity,” the letter says.

“At this important juncture, Canadians should be united around a common goal: increasing Canada’s economic opportunities.”

– with files from Craig Lord and Sean Previl of Global News

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