Justin Trudeau’s decision to step down And prorogue Parliament will prevent his government from implementing his proposal capital gains changes for now, but Canadians may not be tax-free yet.
The changes would increase the share of capital gains on which companies pay taxes from half to two-thirds. The policy would also apply to people whose capital gains exceed $250,000.
The changes were announced in the government’s April budget and then presented as a notice of ways and means motion. These changes were not passed due to gridlock in Parliament over Conservative demands for documents related to alleged inappropriate spending in the government’s green technology fund.
Prorogation clears the Parliamentary Order Paper, meaning bills and motions would have to be reintroduced after the House of Commons resumes.
This process could be delayed, if not completely wiped out, if the Liberals do not survive a widely expected vote of no confidence soon after the start of a new parliamentary session on March 24.
However, the proposed capital gains changes have a problem because of the ways and means motion, said Larry Nevsky, head of the tax group at law firm Dentons in Toronto.
“Only a minister can move a ways and means motion and once that is done, the government is protected and can collect the revenue through taxes,” he said in a LinkedIn post on Monday.
“The simple tabling of a ways and means motion at a parliamentary convention confers temporary power to impose taxes with immediate effect. »
In the case of the capital gains changes, Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, said the Canada Revenue Agency already told accountants last year that it would follow “standard practice” and begin implementing the proposed capital gains measures. capital gains realized on or after June 25, 2024, even if the legislation has not been adopted.
The CRA has not provided an update since Parliament was prorogued, and neither it nor the Finance Department immediately responded to questions from The Canadian Press on Monday about how it would handle taxes subject to the Liberal proposal.
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“So people are now going to be able to file a tax return for 2024, and they don’t know what to do because we don’t have legislation passed by Parliament,” he said.
Golombek suggests clients prepare to pay higher taxes on capital gains. He believes that if the law is not passed, anyone who pays will likely be reimbursed, but if the law is passed later and you haven’t paid, you may have to pay late interest.
“The proposed change is now dead unless it is proposed again by whoever replaces (Trudeau) as head of government,” said Benjamin Bergen, president of the Council of Canadian Innovators.
“We see this as a positive step in our capital gains situation.”
The Bergen-led industry group is made up of more than 150 CEOs of high-growth companies headquartered in Canada.
Although the Trudeau government maintained that the changes would only impact the richest 0.13 percent and generate $19.3 billion in revenue over the next five years, CCI members feared hinders the ability of entrepreneurs to raise capital.
“If it becomes less attractive to raise risky capital in Canada rather than, say, south of the border, that money is going to flow elsewhere, and entrepreneurs are going to start flowing elsewhere as well, and talent is going to flow. elsewhere,” Bergen said.
“So the capital gains were a triple whammy, if you will.”
Besides entrepreneurs and the broader innovation ecosystem, he also suspected the changes would hurt tech workers, who are often compensated through stock options.
Harley Finkelstein, president of Ottawa-based e-commerce giant Shopify Inc., was much more direct about the potential harm caused by the proposal.
“What. Are. We. Doing?!?” he posted on X, formerly known as Twitter, in April after the budget was released.
“It’s not a tax on wealth, it’s a tax on innovation and risk-taking. Our policy failures are America’s gains.”
Meanwhile, Kim Furlong, president of the Canadian Venture Capital and Private Equity Association, said in April that the move would “significantly weaken Canada’s entrepreneurial spirit and stifle economic growth in critical sectors of our economy “.
On Monday, his association said: “Canadian businesses now urgently need more clarity from the Canada Revenue Agency as they prepare to file their taxes and plan their tax activities. investment over the coming months. »
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