Opinion: Capital gains tax hike is another fulfillment fiasco in the making
By William Robson, Alexandre Laurin and Nicholas Dahir
It is 29 days since the 2024 federal budget announced major changes to capital-gains taxes. Their centrepiece, replete with make-the-rich-pay” rhetoric, was higher inclusion rates. Other announcements, framed (with no apparent sense of irony) as supporting risk-taking and investment, promised a inclusion rate on some gains for some business owners and an increase in the lifetime capital-gains exemption for Canadian owners of farming and fishing properties and small businesses. The budget said many of these changes, most notably the higher inclusion rates, would take effect on June 25.
June 25 is now only 41 days away. That timeline is a big problem, getting bigger every day. Right now, the budget’s announcements are all we know. It contained no draft legislation and the budget implementation bill, tabled May 2, contained no details. The government is expecting affected taxpayers to sell a lot of assets before June 25: it’s counting on a one-time, $7-billion revenue bump from the sell-off — far above the changes’ ongoing yield — to help it hit its deficit and debt targets this year. But lack of legislation or clarification of the changes may mean the government itself has not figured out how its announcements will actually work.
Changing the inclusion rate for capital gains sounds simple. But nothing in modern taxes is simple, and the details we don’t yet have will matter.
For instance, the budget’s proposals suggest that tax-filers with capital gains that currently expose them to clawbacks of Old Age Security and other benefits might get relief under the new regime. Currently, the net income calculation that determines clawbacks includes taxable capital gains, with
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