House Approves Increase in Capital Gains Tax
A motion to increase the capital gains tax was passed in the House of Commons by a 208 to 118 vote on June 11. The Liberals, NDP, and Bloc Quebecois supported the motion, while the Conservatives opposed it.
Starting on June 25, changes to Canada’s capital gains tax will take effect. This means that Canadian companies will now pay taxes on 66.7 percent of their realized capital gains, up from the current 50 percent. Individuals will be taxed on 50 percent of the first $250,000 of capital gains earned in the year and 66.7 percent of any gains above that threshold under the new system.
The change was initially introduced in the April 2024 budget, but the Liberals later decided to introduce it as a separate bill at a later date.
Ms. Freeland stated on June 10 that the changes to the capital gains tax aim to promote “fairness” in Canada’s tax system. She highlighted that currently, “well-off” Canadians who earn money through investments can end up paying a lower marginal tax rate than individuals with regular incomes like nurses or plumbers.
Ms. Freeland emphasized that the tax changes were a more “fiscally responsible” approach than increasing government debt. These tax adjustments are projected to generate $19.4 billion over the next five years, impacting only the top 0.13 percent of Canadians according to the Liberals. However, the Tories argue that a larger group of Canadians, including many who are not wealthy, will be affected by the tax.
During the question period before the vote, Conservative Leader Pierre Poilievre expressed concerns that the changes to the capital gains tax would worsen existing crises in the country.
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“Prime Minister Trudeau wants to tax doctors when there is a shortage, tax homebuilders during a housing shortage, tax farmers amidst a food price crisis, and tax small businesses in an already shrinking economy,” Mr. Poilievre stated.
“Fortunately, if you’re a billionaire, you won’t be affected. The prime minister has given billionaire individuals two months to sell their assets, withdraw their money from Canada, and establish businesses outside the country or in distant locations,” he added.
