New changes to capital gains taxation take effect Tuesday. For capital gains of $250,000 or less, the inclusion rate remains at 50%. This measure, announced by Prime Minister Justin Trudeau, is designed to ensure generational fairness.
The Liberal government hopes to raise $19.4 billion over the next five years to fund housing and other priorities for young people. The motion was passed with the support of the NDP, Bloc Québécois and Greens, but was rejected by the Conservatives.
Conservative leader Pierre Poilievre fears that wealthy Canadians will find ways to escape taxation, adversely affecting farmers, small businesses, doctors and home builders. Business and medical advocacy groups also criticize the measure, saying it will reduce competition and innovation.
Finance Minister Chrystia Freeland defends the measure, saying it will affect only a small fraction of the wealthiest Canadians. Ottawa estimates that 0.13% of Canadians will pay higher taxes on their capital gains each year.
To encourage entrepreneurship, a new incentive proposes to reduce the inclusion rate by one-third on a lifetime maximum of $2 million in eligible capital gains.
An IMF statement expressed a quietly positive opinion, saying the change is unlikely to have a significant impact on investment or productivity growth.
