Capital gains changes could have ‘irreversible’ effects, business groups warn

Six large industry groups wrote in a letter to Freeland that the proposed capital gains changes will impede economic growth and come at the expense of future generations.

Business groups are warning Finance Minister Chrystia Freeland that increasing Canada’s capital gains inclusion rate will have “significant knock-on impacts” if implemented with possible “irreversible repercussions.”

Six of the country’s largest industry organizations wrote in an open letter to Freeland Thursday that the proposed hike will impede economic growth and come at the expense of future generations.

“Put simply, this measure will limit opportunities for all generations and make Canada a less competitive, and less innovative nation,” the letter said.

“While this proposed measure attempts to provide a solution to Canada’s deficit, it is shortsighted and complex, and it sows division at a time when we need a Team Canada approach to economic growth.”

The letter was signed by the heads of the Canadian Chamber of Commerce, the Canadian Federation for Independent Business, Canadian Manufacturers and Exporters, the Canadian Venture Capital and Private Equity Association (CVCA), the Canadian Franchise Association and Canadian Canola Growers Association.

Freeland tabled the federal government’s 2024 Budget on April 16, which included a proposal to raise the inclusion rate — the portion of capital gains on which tax is paid — to 66.7 per cent for individuals realizing more than $250,000 in capital gains annually.

The changes would also apply to all annual capital gains realized by corporations and trusts.

While not included in the budget implementation bill, Freeland told reporters on April 30 that the legislation for capital gains tax changes is still coming, and the Liberals are committed to implementing it on the budget’s planned June 25 date.