The fate of the capital gains tax hike is uncertain after Prime Minister Justin Trudeau decided to resign and prorogue Parliament.
Proposed changes to the capital gains tax were announced by the federal government in its budget last April and introduced as a ways and means motion in the House of Commons in June. The bill did not pass due to pushback from the Conservatives.
The tax hike would impact a small portion (0.13 per cent) of the wealthy population. According to the government, the inclusion rate would be increased from one-half to two-thirds for any Canadian individual or corporation that makes over $250,000 per year in capital gains.
“An increased Lifetime Capital Gains Exemption would ensure most middle-class entrepreneurs won’t pay more tax because of these changes, and the new Canadian Entrepreneurs’ Incentive would encourage entrepreneurs to invest in capital-intensive and high-growth sectors,” reads a news release from Canada’s department of finance.
A previous article covered an example of how a wealthy person might be impacted.
The House defines the prorogation of Parliament as “the termination of a session.” During this period, bills that haven’t passed into law “die,” but the government can choose to revive them once Parliament is back in session.
However, that doesn’t guarantee a smooth passing of the capital gains tax bill. Efforts could be squandered if the Liberal government doesn’t survive a non-confidence vote, which will likely happen soon after prorogation ends.
There is a catch to all of this. In an email statement to Daily Hive on Tuesday, an official from Canada’s department of finance said that while these proposed changes are subject to parliamentary approval, the Canada Revenue Agency (CRA) can still administer the hike, which came into effect on June 25, 2024, because it was tabled as a ways and means motion.
“Parliamentary convention dictates that taxation proposals are effective as soon as the government tables a Notice of Ways and Means Motion; this approach provides consistency and fairness in the treatment of all taxpayers,” explained the official.
The CRA generally continues to administer proposed legislation consistent with its established guidelines even when Parliament is prorogued or dissolved, added the spokesperson.
According to the Department of Finance, the CRA will issue the forms by January 31, 2025, so taxpayers can file in accordance with the new capital gains rules.
“Arrears interest and penalty relief, if applicable, will be provided for those corporations and trusts impacted by these changes that have a filing due date on or before March 3, 2025,” stated the official.
Once the House resumes, if no bill is passed and the government doesn’t proceed with the proposed changes, the CRA will stop implementing the measure.
When it was first announced, Canadians criticized the wealthy for being upset by the capital gains tax hike, and certain industries, like the medical field, said the hike could push doctors to quit
