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Pre-budget consultations: The MEI asks Minister Girard to reverse course on increasing the taxation of capital gains to the highest level in the country

  • A Recent study estimates the tax hike could reduce the capital stock by $127 billion across Canada.

Montreal, January 20, 2025 – As part of Quebec’s pre-budget consultations, the MEI is asking Quebec Finance Minister Eric Girard to reverse course on the capital gains tax increase, as Ottawa’s corresponding tax hike seems less and less likely to be enacted.

“When Minister Girard announced that he would increase the capital gains inclusion rate, he said he was doing so to align Quebec taxation with Canadian taxation,” recalls Renaud Brossard, vice president of communications at the MEI. “The minister should face the fact that Ottawa will not be following through, and reverse course before Quebec reinforces its title as the province in Canada with the heaviest tax burden on investment.”

On April 18, 2024, the minister justified his decision to follow Ottawa and increase the capital gains inclusion rate from 50 per cent to 66.7 per cent based on the need to remain coherent with the Canadian tax system.

Yet, no federal bill has been tabled—much less adopted—in order to incorporate the new inclusion rate into law. The prorogation of Parliament, combined with the current government’s minority status, makes it unlikely that such a law will be enacted before the next elections.

Moreover, Conservative leader Pierre Poilievre has announced that he will cancel the capital gains tax hike if he forms the next government.

Liberal MP Anthony Housefather, for his part, asked candidates for the leadership of his party to request that the Canada Revenue Agency no longer apply tax increases before the adoption of legislation, and to commit to not increasing the capital gains tax.

During her campaign launch yesterday, the Liberal Karina Gould announced she would review the increase in the capital gains inclusion rate, should she become leader.

“Let’s be clear: there’s no federal tax increase to maintain; there isn’t even a bill under consideration,” says Mr. Brossard. “It is more and more obvious that this tax hike will not be in the 2024 federal tax code, much less in the tax codes for 2025 or subsequent years.

“As Quebec faces the prospect of increased tariffs, the last thing our companies need is an additional measure to scare away investors.”

In a recent publication, the C.D. Howe Institute estimated the increase in the capital gains inclusion rate could reduce the capital stock by $127 billion across Canada, resulting in 400,000 fewer jobs than there would have been otherwise.

The pre-budget brief submitted by the MEI to the Quebec Finance Department is available here (French only).

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The MEI (formerly known as the Montreal Economic Institute) is an independent public policy think tank with offices in Montreal, Calgary, and Ottawa. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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