Quebec Finance Minister Eric Girard will decide by the end of the week whether Quebec will also increase the taxation of capital gains, as Ottawa will do starting at the end of June.
Mr. Girard estimated Wednesday that such harmonization could bring three billion dollars to Quebec over five years.
“Historically, Quebec has always been harmonized in terms of capital gains rules — always — and this is for reasons of cohesion between the Quebec and federal tax systems,” he explained. He pledged to announce Quebec’s intentions “by the end of the week.”
Mr. Girard recalled that all provinces “will harmonize automatically” in Ottawa, with the exception of Alberta for corporate taxes. “You know, it’s an increase in revenue, it’s an increase in taxes. We want to see what the extent of the measure is, what it will give us, confirm all of that,” added the man who signed his most recent budget in red ink.
In her budget tabled Tuesday, Federal Finance Minister Chrystia Freeland proposes an increase in capital gains tax starting June 25. For individuals making a gain of more than $250,000, the tax would apply to two-thirds of the value of the gain, and no longer to half. The inclusion rate would also increase from half to two-thirds for companies and trusts, although without a minimum level.
In the press scrum, Mr. Girard said he feared that Ottawa was overestimating the gains that the increase proposed by Mr.me Freeland. “We were surprised, the federal government seems to be making more money than we thought. There are fewer in Quebec, we want to check the calculations,” he said. Ottawa calculates that increasing the capital gains tax could bring in $19.3 billion over five years.
The chief economist and strategist for the Desjardins Movement, Jimmy Jean, expressed a similar fear, saying he believed the budget “is based on a lot of hope.” “In fact, we are targeting taxpayers who, as we know, are very tax sophisticated. And this wealth can be moved very quickly, very quickly,” he told Duty.
Not main residences
The day after the federal budget, Prime Minister Justin Trudeau made this measure the central point of his speech to the members of his caucus.
“We don’t think it’s fair that a teacher or an electrician pays tax on 100% of their income, while a multi-millionaire only pays tax on 50% of the passive income they generate from winnings in capital. So, we are going to make them pay a little more,” declared the Prime Minister, to a round of applause.
This tax will not apply to income from sales of principal residences, Mr. Trudeau promised. “Those who will be affected by this measure are those who have benefited from an economy that seems to be tilted in their favor, to the detriment of others, particularly young people.” According to Ottawa projections, the increase in capital gains taxation affects approximately 40,000 people (0.13% of the population).
Back in Quebec, Minister Girard described the Freeland budget as “spendthrift”. “I am referring to the growth rate of expenditure, in 2024-2025, of 6.5%. This could have the effect, if it does not delay the start of the Bank of Canada’s rate cuts, of reducing the extent of the rate cuts,” he worried. “So this fiscal stimulus, this level of significant spending in 2024-2025, is an inconsistency, an error in terms of the harmonization between fiscal policy and monetary policy. I think it’s a budget that is spendthrift,” he observed.
The cuts will affect all ministries
Further details will follow.