Going ahead with capital gains tax hike will hurt competitiveness: Study

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New research suggests that Canada’s decision to move ahead with boosting the capital gains tax would make it among the highest rates in the world.

The study, Canada’s Waning Competitiveness on Capital Gains Taxes, was released Tuesday by the Fraser Institute, and says the increase would result in Canada having the highest capital gains tax in the industrialized world, hurting Canada’s competitiveness.

“The evidence is clear — taxing capital gains deters investment, particularly smaller and start-up firms, which in turn slows productivity gains and innovation, all things Canada needs right now to raise living standards for workers,” said Jake Fuss, study co-author and director of fiscal studies at institute.

The proposal would have increased the inclusion rate for individuals who see over $250,000 annually in capital gains, and from one-half to two-thirds for corporations.

While this month’s prorogation of parliament resulted in a number of important bills dying on the order paper, legislation to boost the capital gains tax — a key promise in the most recent budget — was never tabled in the House of Commons.

Despite this, the Canada Revenue Agency is pushing ahead with the increases, a subject key in a letter to Finance Minister Dominic LeBlanc penned Tuesday by Conservative Finance Critic Adam Chambers.

“After completely losing control of spending, your NDP-Liberal government decided to launch a disastrous capital gains tax hike on workers, homebuilders, doctors, farmers and small businesses,” the letter read, which again stated that no legislation was ever passed to make the tax hike legal.

“Despite this, the Canada Revenue Agency has already begun collecting capital gains taxes at the new and higher rate, even though Common Sense Conservatives will never allow it to become law.”

In the study, which was co-written by economist Grady Munro, Fuss concluded that hiking the tax will hurt Canada’s competitiveness.

“A significant body of literature concludes that capital gains taxes are among the most economically damaging,” the report read.

“In particular, the recent increase in the inclusion rate will adversely affect investment, productivity, entrepreneurship, and innovation in Canada.”

bpassifiume@postmedia.com
X: @bryanpassifiume

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