Murray Wood: Saskatchewan NDP might be better off with a new name
While Carla Beck has been trying to bring the Saskatchewan NDP closer to the centre, Murray Wood says the federal NDP ha...
Justin Trudeau’s decision to step down and prorogue Parliament will keep his government from implementing its proposed changes to capital gains for now, but Canadians might not be off the hook with tax collectors just yet.
The changes would raise the portion of capital gains on which companies pay tax to two-thirds from one-half. The policy would also apply to individuals with capital gains earnings above $250,000.
The changes were announced in the government’s April budget, and subsequently introduced as a notice of ways and means motion. Those changes did not pass due to the gridlock in Parliament over Conservative demands for documents related to alleged misspending in the government’s green technology fund.
Proroguing clears the parliamentary order paper, meaning bills and motions would have to be reintroduced after the House of Commons resumes.
That process could be delayed or completely scuttled if the Liberals don’t survive a non-confidence vote widely expected soon after a new parliamentary session begins on March 24.
However, the proposed capital gains changes have a wrinkle because of the ways and means motion, said Larry Nevsky, the head of law firm Dentons’s tax group in Toronto.
“Only a minister can propose a ways and means motion and once this is done, the government is protected and may collect the revenue through taxes,” he said in a Monday post on LinkedIn.
“The mere tabling of the ways and means motion parliamentary convention provides temporary authority to impose taxes effective immediately.”
In the case of the capital gains changes, Jamie Golombek, the managing director of tax and estate planning with CIBC Private Wealth, said the Canada Revenue Agency previously told accountants last year that it would follow “standard practice” and start applying the proposed measures on capital gains realized on or after June 25, 2024, even though legislation hadn’t passed.
The CRA hasn’t offered an update since the prorogation of Parliament and neither it nor the finance ministry immediately responded to questions Monday from The Canadian Press about how it would treat taxes subject to the Liberal’s proposal.
“So people are now going to be in a position to file a 2024 tax return, and they don’t know what to do because we don’t have legislation that has been passed by Parliament,” he said.
Golombek is suggesting clients prepare to pay the higher capital gains taxes. He reasons if the legislation doesn’t pass, anyone who pays will likely get a refund, but if it later passes and you didn’t pay, you could be hit with interest fees for being late.
“The change put forward is now dead unless it’s brought forward again by whoever does replace (Trudeau) as leader,” said Benjamin Bergen, the president of the Council of Canadian Innovators.
“We do view this as a positive step in terms of where we are at with capital gains.”
The industry group Bergen leads is made up of more than 150 CEOs from high-growth companies headquartered in Canada.
Though the Trudeau government maintained the changes would only impact the wealthiest 0.13 per cent and result in $19.3 billion in revenue over the next five years, CCI’s members feared it would hinder the ability of entrepreneurs to raise capital.
“If it becomes less attractive to raise risky capital in Canada as opposed to, let’s say, south of the border, that money is going to flow elsewhere, and entrepreneurs are going to begin to flow elsewhere as well, and talent is going to flow elsewhere,” Bergen said.
“So the capital gains was a bit of a triple whammy, if you will.”
Aside from entrepreneurs and the broader innovation ecosystem, he also suspected the changes would hurt tech workers who are often compensated with stock options.
Harley Finkelstein, president of Ottawa-based e-commerce giant Shopify Inc., was much more blunt about the potential harms caused by the proposal.
“What. Are. We. Doing?!?” he posted on X, formerly known as Twitter, in April after the budget was released.
“This is not a wealth tax, it’s a tax on innovation and risk taking. Our policy failures are America’s gains.”
Meanwhile, Kim Furlong, the head of the Canadian Venture Capital and Private Equity Association, said in April that the move would “significantly dampen Canada’s entrepreneurial spirit, stifle economic growth in critical sectors of our economy.”
On Monday, her association said, “Canadian businesses now urgently need greater clarity from the Canada Revenue Agency as they prepare to file their taxes and plan for investment activity over the coming months.”
This report by The Canadian Press was first published Jan. 6, 2024.
Companies in this story: (TSX:SHOP)
Tara Deschamps, The Canadian Press
