Trudeau's Government to Vote on Capital-Gains Tax Increase, Raising Billions Despite Business Concerns

By Madz Dizon

Jun 10, 2024 09:22 AM EDT

Trudeau's Government to Vote on Capital-Gains Tax Increase, Raising Billions Despite Business Concerns — Canadian Prime Minister Justin Trudeau holds a press conference on the airline industry in Montreal, Quebec on July 15, 2021.
(Photo : ANDREJ IVANOV/AFP via Getty Images)

The Canadian government, led by Prime Minister Justin Trudeau, is set to propose a vote this week on increasing the capital-gains tax inclusion rate.

This move is expected to generate significant additional revenue for the government, but it has been criticized by the business community.

Finance Minister Freeland Proposes Capital Gains Tax Motion

In a speech in Toronto on Sunday (June 9), Finance Minister Chrystia Freeland announced her intention to present a motion in the House of Commons on Monday (June 10).

According to the speaker, the proposed reforms will align with the government's previous announcements, maintaining the exemption for gains on the sale of primary residences and setting an implementation date of June 25.

In April, the government announced its intention to raise the capital-gains tax for companies and individuals who make gains exceeding C$250,000 ($182,000) in a given year, Bloomberg reported.

At present, approximately half of the gains are currently subject to either corporate or personal income tax.

However, this percentage is expected to increase to two-thirds in the near future. Owners of certain small businesses, farms, and fishing operations may be eligible for exemptions and reductions.

Trudeau Defends Tax Change to Encourage Wealthy Contribution

The move has sparked a significant backlash from business groups, who assert that it will negatively impact Canada's investment appeal and exacerbate productivity challenges.

Last month, Trudeau stated that the tax change aims to encourage the wealthy to contribute more to society.

At present, only a portion of those gains are subject to corporate or personal income tax, but that percentage will increase.

According to Financial Post, owners of certain small businesses, farms, and fishing operations may be eligible for exemptions and reductions.

This also covers the Canadian Entrepreneurs Incentive mentioned in Freeland's budget for this year. Under specific circumstances, the incentive suggests a lower inclusion rate of 33.3% on a maximum of C$2 million in eligible capital gains for company founders.