The Canada Revenue Agency will continue to administer the Liberals’ increased capital gains tax rate, despite the fact that it hasn’t passed in Parliament, which was prorogued by Prime Minister Justin Trudeau last week until March 24, 2025.
The capital gains tax was part of the Liberals’ 2024 federal budget and requires Canadians making more than $250,000 in capital gains annually to pay taxes on two-thirds of that profit instead of half.
True North contacted the CRA for clarification regarding how Trudeau’s decision to prorogue Parliament would affect the new capital gains tax increase.
The CRA forwarded the inquiry to the Department of Finance and a spokesperson responded by saying that the capital gains tax came into effect as soon as the government tabled its ways and means motion on June 10 of last year.
“Although these proposed changes are subject to parliamentary approval, consistent with standard practice, the Canada Revenue Agency (CRA) is administering the changes to the capital gains inclusion rate effective June 25, 2024, based on the proposals included in the Notice of Ways and Means Motion tabled September 23, 2024,” Finance Department spokesperson Benoit Mayrand told True North.
The department noted that “this approach provides consistency and fairness in the treatment of all taxpayers.”
However, the Canadian Taxpayers Federation’s general counsel and Atlantic director Devin Drover argues that taxation can only be implemented after it becomes law.
“The CRA is trying to enforce a tax increase without it ever becoming law. Taxation should only be based on laws duly passed by elected representatives and not assumptions by unelected, unaccountable bureaucrats,” Drover told True North.
“What they are doing is a clear violation of the long-held principle that there should be no taxation without representation.”
The CRA did confirm it would stop administering the policy upon Parliament resuming if the government “signals its intent to not proceed with the proposed measures, the CRA would cease to administer them.”
“In the event that Parliament is prorogued, or dissolved, the CRA will generally continue to administer proposed legislation consistent with its established guidelines,” noted Mayrand.
The capital gains tax has been a bone of contention for many Canadians as it’s poised to cost the Canadian economy even more than expected, resulting in almost $90 billion in lost GDP.
Former deputy prime minister and finance minister Chrystia Freeland told the public last summer that the capital gains tax was necessary to help the federal government pay for the extra spending included in its latest budget.
Freeland pointed out that the alternative to a tax hike was that the government would go further into debt.
Still, Drover believes that both Trudeau and the CRA are attempting to “treat elected representatives like a rubber stamp,” as opposed to having Parliament adhere to its crucial duty of holding a “vote on tax hikes before the government takes more money from you.”
“The CRA must immediately halt plans to enforce legislation that hasn’t been passed and will undemocratically cost Canadians $6.9 billion this year. If not, this capital gains tax hike, the first in 25 years, is going to undemocratically hurt physicians, entrepreneurs, small business owners and other job creators,” said Drover.
The Department of Finance went on to say that the CRA would be issuing forms related to the new capital gains rules to taxpayers by January 31.
“Arrears interest and penalty relief, if applicable, will be provided for those corporations and trusts impacted by these changes that have a filing due date on or before March 3, 2025,” it said.