The Canadian Taxpayers Federation is taking the Canada Revenue Agency to court to stop the federal agency from enforcing a capital gains tax hike that has not gone through the proper legal processes.
“This tax grab violates the fundamental principle of no taxation without representation. That’s why we are asking the courts to put an immediate stop to this bureaucratic overreach,” said Canadian Taxpayers Federation Legal Counsel Devin Drover.
The Canadian Taxpayers Federation is representing Debbie Vorsteveld, an Ontario resident who sold a property last year that included a secondary home. Vorsteveld and her husband rented the property to their children and decided to sell it when they moved out. The CRA is allegedly forcing the Vorstevelds to pay higher capital gains under the tax change.
The capital gains tax change would raise the inclusion rate for capital gains tax from 50% to 66.7% on amounts exceeding $250,000. The Liberals estimate receiving an extra $19.4 billion in revenue from raising the tax.
“The CTF is seeking urgent relief from the Federal Court to block the CRA’s enforcement of the proposed tax increase. In its application, the CTF argues the tax increase violates the rule of law and is unconstitutional,” reads a press release issued by the federation.
While a ways and means motion for the tax increase was passed last year, it was never introduced, debated, or passed as legislation in Parliament.
Legal Counsel of the Canadian Constitution Foundation, Josh Dehaas, told True North that tax hikes must be debated and voted on by the people’s representatives in Parliament before it can be legally implemented.
“Hiking taxes without parliamentary approval violates the principle of responsible government,” said Dehaas.
He said it’s a longstanding tradition for the CRA to enforce tax measures from the day a ways and means motion passes, which for the capital gains tax hike occurred on June 11. He explained that this is normally a nonissue because the bill received royal assent by the time the CRA starts charging interest to those who don’t comply.
“However, that doesn’t mean it was ever constitutional for the CRA to have had this policy. The ‘ways and means’ motion is a signal of what the executive wants to do, but under our constitution, the hike doesn’t exist until Parliament has voted to pass the bill, and the bill has gained royal assent,” said Dehaas.
Legal Counsel for the Canadian Taxpayers Federation, Devin Drover, told True North that the constitution supports their legal challenge.
“The CRA is planning to enforce a capital gains tax hike when the legislation required to impose the hike – including an amendment to the Income Tax Act – was never authorized by Parliament,” said Drover. “Thus, unelected bureaucrats at the CRA are pushing a tax change on Canadians without legislative approval, which is illegal and unconstitutional.”
Drover said that the CTF has filed for an expedited hearing and is seeking for the enforcement of the tax hike to be halted immediately. He said Canadians cannot afford to wait months for this to be decided, especially considering the deadline to file their taxes by Apr. 30, 2025. The federation has requested an urgent hearing from the court.
“This is truly a unique circumstance as the CRA has never acted so brazen to ignore our country’s constitutional order before. So we are looking forward to the Federal Court hearing this issue and setting a precedent on the importance of there being no taxation imposed on Canadian taxpayers without approval by the elected representatives,” said Drover.
He added that the “illegal and undemocratic” tax hike will decimate Canada’s economy.
A previous report highlighted that the capital gains tax hike could cost nearly $90 billion in lost GDP and over 400,000 jobs. Another study said it would drive down competition and chase away investment.
“No taxation without representation is not just a slogan. It’s a core principle of Canada’s constitutional architecture that can not be ignored by unelected bureaucrats or the Trudeau government,” said Drover.