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Bill Morneau slams Freeland's budget as a threat to investment, economic growth

Bill Morneau slams Freeland's budget as a threat to investment, economic growth

CBC
Thursday, April 18, 2024 12:39 AM GMT

Finance Minister Chrystia Freeland's predecessor Bill Morneau says there was talk of increasing the capital gains tax when he was on the job — but he resisted such a change because he feared it would discourage investment by companies and job creators.

He said Canada can expect that investment drought now, in response to a federal budget that targets high-end capital gains for a tax hike.

"This was very clearly something that, while I was there, we resisted. We resisted it for a very specific reason — we were concerned about the growth of the country," he said at a post-budget Q&A session with KPMG, one of the country's large accounting firms.

Morneau, who served as Prime Minister Justin Trudeau's finance minister from 2015 to 2020 before leaving after reports of a rift, said Wednesday that Freeland's move to hike the inclusion rate from one-half to two-thirds on capital gains over $250,000 for individuals, and on all gains for corporations and trusts, is "clearly a negative to our long-term goal, which is growth in the economy, productive growth and investments."

Morneau said the wealthy, business owners and corporations — the people most likely to face a higher tax burden as a result of Freeland's change — will think twice about putting money to work in Canada because they stand to make less on their investments.

"We've created a disincentive and that's very difficult. I think we always have to recognize any measure that creates a disincentive for investment not only impacts us within the country but also impacts foreign investors that are looking at our country," he said.

"I don't think there's any way to sugarcoat it. It's a challenge. It's probably very troubling for many investors."

KPMG accountants on hand for Morneau's remarks said they've already received calls from some clients worried about how the capital gains change will affect their investments.

While Freeland's move to tax the well-off to pay for new spending is catching heat from wealthy businesspeople like Morneau, and from the Canadian Chamber of Commerce, progressive groups said they were pleased by the change.

"We appreciate moves to increase taxes on the wealthiest Canadians and profitable corporations," said the Canadian Labour Congress.

"We have been calling on the government to fix the unfair tax break on capital gains for a decade," said Katrina Miller, the executive director of Canadians for Tax Fairness. "Today we are pleased to see them take action and decrease the tax gap between wage earners and wealthy investors."

"This is how housing, pharmacare and a Canada disability benefit are afforded. If this is the government's response to spending concerns, let's bring it on. It's about time we look at Canada's revenue problem," said the Canadian Centre for Policy Alternatives.

The capital gains tax change was pitched by Freeland as a way to make the tax system fairer — especially for millennials and Generation Z Canadians who face falling behind the economic status of their parents and grandparents.

"We are making Canada's tax system more fair by ensuring that the very wealthiest pay their fair share," Freeland said Tuesday after tabling her budget in Parliament.

Read full story on CBC
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