Ottawa needs to release rules for capital-gains tax now or risk abandoning proposals later

The 2024 federal budget announced higher capital-gains taxes that will be effective June 25. Instead of paying tax on half of all gains under current rules, individuals will pay tax on half of gains under $250,000 and on two-thirds of gains over $250,000, and companies will pay tax on two-thirds of all gains.

Dismissing a federal budget’s proposals as unworkable from the start might seem premature. But a government that focuses on announceables, with little time or interest in advice from its own officials or outside experts, often gets things wrong. The new capital-gains tax rules will be complicated. Along with the higher general inclusion rates, the government proposes a lower inclusion rate for owners of some businesses, as well as changes to the lifetime capital-gains exemption for owners of other businesses. The proposals will affect estate planning, stock options and charitable donations.

Disturbingly, the government might not see a last-minute walk-back of its capital-gains tax changes as a fail. The June implementation of a higher inclusion rate that is retroactive – affecting past gains, not just those that accrue in the future – matters more to its revenue plans than the permanent changes. Taxpayers with capital gains have an interval to dispose of their assets and pay the current inclusion rate.

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