Joint Letter to Deputy Prime Minister Chrystia Freeland on Capital Gains Tax

Read the full letter below.

May 9, 2024
The Honourable Chrystia Freeland, P.C., M.P.
Deputy Prime Minister and Minister of Finance
Department of Finance
90 Elgin Street
Ottawa, Ontario K1A 0G5

Delivered via email: chrystia.freeland@fin.gc.ca

As national industry associations representing Canadian companies committed to growing our economy, investing in this country and creating more opportunities for Canadians, we are alarmed to see these goals threatened by Budget 2024’s proposed increase to the capital gains inclusion rate. While this proposed measure attempts to provide a solution to Canada’s deficit, it is shortsighted and complex, and it sows division at a time when we need a Team Canada approach to economic growth.

While the 2024 budget includes positive measures to assist small businesses, like increasing the Lifetime Capital Gains Exemption to $1.25M, the increase in the inclusion rate to 67% is deeply concerning to Canada’s business community writ large. Given Canada’s growing productivity crisis which extends across the economy, supports for businesses like those announced in Budget 2024 should be extended equally across sectors and should not be contingent on tax increases.

Under successive governments, our tax system has become a complicated web of carve-outs and caveats. Our country must end its reliance on tax-and-spend politics, which is undermining innovation and growth to the detriment of both today’s Canadians and future generations.

The capital gains increases proposed in Budget 2024 are being defended as a matter of generational fairness. In fact, generational fairness should consider the actions we are taking today at the expense of our future prosperity. At this important juncture, Canadians should be united around a common goal: increasing Canada’s economic opportunity.

The assertion that the increase of the inclusion rate to 67% will only affect a small percentage of the wealthiest Canadians is misleading. In fact, one in five Canadian companies are likely to be directly impacted over the next ten years and the effects of this tax hike will be borne by all Canadians, directly or indirectly. Whether through the diminishing the creation of new companies and jobs, reducing the availability of medical practitioners, eroding hard-earned pension returns, altering the delicate risk-reward balance of countless investments, or threatening the retirement plans of millions of Canadians who pinned their plans on the proceeds of selling a family cottage or a small business grown over a lifetime, the effects will ripple from coast to coast to coast.

This proposed tax hike will only serve to undermine the government’s stated policy objectives: bolstering health and dental care for Canadians, attracting and retaining skilled professionals, increasing investment and innovation, and helping small businesses thrive. If enacted, this change will have significant knock-on impacts, including making it harder for Canadians to access medical practitioners, limiting employment opportunities, and making the prospect of starting, growing or succession planning a business more difficult especially for multi-generational businesses such as farms, fisheries and small businesses.

Put simply, this measure will limit opportunities for all generations and make Canada a less competitive, and less innovative nation. At a time when we are already urgently struggling to reignite our nation’s lagging productivity, increasing taxes on productive investments and throttling Canadian potential will have profound, long-lasting and potentially irreversible repercussions.

We are calling on the government to heed the advice of many of Canada’s most respected leaders and commit to scrapping the ill-advised inclusion rate increase.

Canada needs a simple, fair and principled tax system that works in the best interests of Canadians. We urge all political parties to commit to a comprehensive, independent review of Canada’s tax system, which is currently complicated and burdensome and drives away investment.

Sincerely,

Hon. Perrin Beatty, P.C., O.C.
President and CEO
Canadian Chamber of Commerce

Dan Kelly
President, CEO and Chair
Canadian Federation for Independent Business

Dennis A. Darby, P.Eng., ICD.D
President & CEO
Canadian Manufacturers & Exporters

Kim Furlong
Chief Executive Officer
Canadian Venture Capital and Private Equity Association (CVCA)

Sherry McNeil
President and Chief Executive Officer
Canadian Franchise Association

Dave Carey
Vice-President, Government & Industry Relations
Canadian Canola Growers Association