Prime Minister Justin Trudeau is pushing back at growing criticism of his government’s move in the 2024 federal budget to raise the capital gains tax.
The rise in the capital gains tax is a threat to investment, Mr. Morneau had said on April 17.
Currently, only 50 percent of any capital gain is taxable in Canada. The proposed tax hike will see individuals pay tax on 50 percent of the first $250,000 of capital gain earned in the year, but 66.7 percent of any gain above that threshold. For corporations and trusts, the capital gains tax is increasing from 50 percent to 66.7 percent on the entire gain.
Mr. Trudeau told reporters the changes are aimed at helping younger generations.
“We’re doing it by asking people who are the absolute wealthiest in this country to contribute a little bit more,” he said. “I understand for some people, this may cost more if they sell a cottage or a secondary residence. But young people can’t buy their primary residences yet.”
In response to a reporter’s question on the CMA’s concerns, Mr. Trudeau said he felt it was unfair for students or electricians to pay taxes on 100 percent of their income while others pay taxes on only 50 percent.
“So yes, we are asking the most successful in this country to do a little bit more to make sure that everyone can see themselves in the success of this country,” he said.
Regarding Canadians who use investment properties to fund their retirements and who could face higher taxes due to the proposed changes, Mr. Trudeau said the tax increase will not affect primary residences.
‘This Will Stifle Growth’
Mr. Trudeau’s comments came amid his efforts to frame the capital gains tax increase as intergenerational economic fairness while facing resistance from various groups.“Anybody with experience in entrepreneurship and investment can see how this will stifle growth,” the letter said.
The capital gains tax increase is set to be deferred for two months and will not come into force until June 25, a move Budget Officer Yves Giroux called surprising.
“For the capital gains, it’s very likely to lead to a phenomenon where people will sell some assets before June 25 so their capital gain is all included at 50 percent rather than the higher two-thirds rate,” he said.
