Quebec Finance Minister Eric Girard will decide by the end of the week whether Quebec will also increase the tax on capital gains, as Ottawa will do starting at the end of June. Mr. Girard estimated Wednesday that such harmonization could bring $3 billion 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 it is, the extent of the measure, what it will give us, confirm all 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 half. The inclusion rate would also increase from half to two-thirds for companies and trusts, without a minimum level however.
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 that the federal 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,” the Prime Minister declared 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, or 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.
Jimmy Jean, for his part, believes that if the increase in public spending adds economic activity – and therefore inflation – it does not necessarily indicate a return to a period of overheating. The announced drop in admissions of non-permanent residents will be disinflationary, given the negative impact on growth, he indicates.
Areas of expertise
The reaction to Minister Girard’s budget surprised the federal Minister of Tourism, Soraya Martinez Ferrada, MP for Hochelaga. “I still find it incredible that the provinces criticize us for spending too much,” she said Wednesday morning.
Asked about investments in areas falling under Quebec’s jurisdiction, in particular billions for a school feeding program and for the construction of new housing, the minister believes that it is a shared responsibility. “We all have to do our part. We are taking a good step forward and we are asking the provinces to do the same thing,” she argued.
Several measures in Tuesday’s federal budget — the implementation of a housing plan, among others — have been denounced by the provinces, who consider them to be interference in their areas of jurisdiction.