(Ottawa) If the Trudeau government were to fall this fall following a motion of non-confidence endorsed by the three opposition parties, it would lead to the cancellation of the increase in the capital gains tax, a controversial measure in Finance Minister Chrystia Freeland’s last budget, which is expected to bring in $19 billion to the federal treasury over five years.
This is because Minister Freeland chose to implement this measure on June 25 by having a ways and means motion passed in the House of Commons – not a full bill passed by Parliament. However, a ways and means motion becomes unenforceable if Parliament is dissolved. Only a full implementation bill can survive a general election.
Result: the federal government would have to deal with a significant drop in revenues in its financial projections over the next five fiscal years if this scenario were to materialize. In its last budget, Ottawa estimated that it would pocket $6.9 billion in additional revenues starting this fiscal year and $19 billion over five years.
This new windfall should notably allow Minister Freeland to keep the deficit below the 40 billion mark next year while financing new measures such as the national dental care program.
Incidentally, the fall of the Trudeau government in such a context could also affect Quebec. Because the Minister of Finance, Eric Girard, hastened to harmonize the rate of the capital gains tax with that decreed by Ottawa. Quebec calculates that this measure will bring in an additional 1 billion in its coffers in the first year and 3 billion over a period of five years.
Minister Freeland had chosen not to include the capital gains tax increase in the federal budget implementation bill – which was passed by the Commons and the Senate in June – in order to force the Conservative Party to take a clear position on the measure in a separate vote. Some saw the move as a political trap that could serve the Liberals well ahead of the next election campaign.
PHOTO ADRIAN WYLD, THE CANADIAN PRESS
Finance Minister Chrystia Freeland chose to implement the measure on June 25 by having a ways and means motion passed in the Commons – not a full-fledged bill through Parliament.
After maintaining the uncertainty, Conservative leader Pierre Poilievre announced at the last minute that his party would vote against it and promised to abolish the increase if his party won the next federal election. He also committed to setting up a task force to review Canada’s entire tax system.
From 50% to 66%
Under this increase, the taxable portion of capital gains increased from 50% to 66% for individuals who declare more than $250,000 in capital gains annually. Below this threshold, the taxable portion of capital gains remained at 50%. The capital gains tax applies in particular to secondary residences, cottages and residential buildings.
But in the case of businesses, the portion of capital gains that is taxable increases from 50% to 66% from the first dollar of gain.
It was senator and seasoned economist Clément Gignac who first raised the possibility that the fall of the Trudeau government would also sound the death knell for the increase in the capital gains tax.
Minister Freeland took a risk by failing to include this measure in the budget implementation bill. She now exposes herself to the vagaries of politics and the risk that suddenly, this fall, this measure will fall apart if the government is defeated.
Senator Clément Gignac
He recalled that in December 1979, then-Finance Minister John Crosbie imposed an 18-cent increase in the excise tax on gasoline in his budget. But that measure was reversed after Joe Clark’s minority Conservative government was defeated in the Commons a few days later.
“Revenue Canada found itself in a situation where for a few days, the 18-cent excise tax on gasoline applied at the pump. But when the Clark government was defeated, Revenue Canada had to stop collecting it because it had not been passed into law. When Parliament is dissolved, anything that has not been formally passed is no longer in effect,” he explained.
Minister Freeland had promised to propose a draft bill in July, but this has not happened. No bill to implement this measure has yet been tabled in the Commons.
Mr. Gignac said the Senate has no intention of cutting corners on the issue this fall to satisfy the Trudeau government’s political imperatives.
No comments
The Finance Minister’s office declined to comment on the situation, saying only that the government had made its intentions clear in the budget and in the ways and means motion.
Bloc Québécois finance critic Gabriel Ste-Marie said the Trudeau government has sought to present a more favourable picture of public finances. “Obviously, that’s not the way to do things. […] “This is not being respectful of people. We find ourselves in the situation where if the government is defeated, there are people who made decisions based on the entry into force of this measure,” he said.
The Bloc Québécois believes that we must limit tax measures that allow “billionaires and millionaires to pay less tax,” without penalizing middle-class people who invest in rental housing, for example, to save for their retirement.