Liberal leadership candidate Chrystia Freeland will scrap changes to the capital gains tax introduced as finance minister, CBC News has confirmed. This news was first reported by Bloomberg.
April's federal budget announced an increase in the taxable amount of capital gains – the profit that individuals or businesses make by selling assets such as stocks or second homes.
The new rules increase the inclusion rate from one-half to two-thirds on capital gains above $250,000 for individuals, and on all capital gains earned by corporations and trusts, meaning that part of the capital gains will be taxed as regular income.
If his bid to replace Justin Trudeau is successful, Freeland will reverse those changes, a source close to the former deputy prime minister said.
Freeland originally defended the changes to the inclusion rate when she was still finance minister, saying they were meant to address tax fairness issues. She said at the time that the increase would draw $19 billion in new housing and support funding for large-scale social programs such as dental care and pharmacare.
It's the second major Liberal policy Freeland has walked away from in his bid to become the next Liberal leader and prime minister. If Freeland wins, she will also drop the consumer carbon tax.
The source suggested that Freeland's about-face about capital gains tax was due to concerns that US President Donald Trump might introduce changes to US capital gains tax. Sources said Canada must be able to respond to changes south of the border or risk losing investment. When the inclusive rate hike was first proposed, then-President Joe Biden was proposing an increase in the U.S. capital gains tax rate.
Conservative leader Pierre Poilivre recently said that if his party forms a government after the next election, he will reverse the increase in the inclusive rate on capital gains. On Wednesday, Poilivre criticized Freeland for reversing his position on inclusive rates.
“Her slogan should be: 'I'm Chrystia and I was wrong about everything,'” he wrote in a post on X.
Commenting on Bloomberg's article on X, NDP national revenue critic Nicky Ashton accused Freeland of “favouring the billionaires”.
Legislation to officially introduce the capital gains changes was before the House of Commons, but is now essentially dead after Trudeau asked Parliament to adjourn.
But the Canada Revenue Agency is still collecting taxes at the higher inclusive rate, because the government passed a “ways and means” proposal in Parliament.
The Conservatives and several business advocacy groups have called on the government to order the CRA to stop collecting capital gains at the increased inclusive rate because official legislation has not been passed.
