The CFIB calls on the federal government to halt the capital gains tax rise, citing negative impacts on small businesses
With less than a week before Canada’s capital gains tax inclusion rate rises, the Canadian Federation of Independent Business (CFIB) calls on the federal government to scrap the change.
The CFIB warns that the increase will negatively impact thousands of enterprises and their owners, reports BNN Bloomberg.
The CFIB, in a press release on Thursday, revealed that half of all small-business owners in Canada will be affected by the new 66.7 percent capital gains inclusion rate, set to take effect on June 25.
“Despite (the) government’s claim that the rate would affect only a tiny share of the wealthiest Canadians, over half (55 percent) of small business owners say it will affect the eventual sale of their business,” the release states.
The survey also shows that 45 percent of owners say the tax changes will affect their private investments, while 41 percent say it will impact investments within their businesses.
“Business owners who hold investments within their corporations for retirement or reinvestment will be hit by the 66.7 percent inclusion rate on any capital gain, as corporations are ineligible for the $250,000 annual allowance at the 50 percent level,” the release adds.
CFIB president Dan Kelly points out that more than 300,000 Canadian corporations reported net capital gains in 2022. He argues that many businesses realize capital gains only occasionally, making the proposed increase to the inclusion rate unnecessarily punitive.
“The impact of the hike in the inclusion rate needs to be measured over the long term, not just in any one given year,” says Kelly.
“With details of the changes in the inclusion rate only coming out in last week’s Ways and Means Motion, business owners were only given two weeks to make informed decisions, leaving virtually no time to change gears.”
The CFIB sent a letter to federal finance minister Chrystia Freeland late last month, recommending changes to the proposed legislation.
While opposing the inclusion rate increase, the CFIB asks the government to retain certain positive measures, such as increasing the lifetime capital gains exemption from 1 million to 1.25 million.
However, the letter highlights that 60 percent of CFIB members oppose the legislation as a whole without critical amendments. The CFIB also criticizes the timeline for implementing the changes, which it says leaves business owners scrambling.
“CFIB and tax advisors have been fielding hundreds of calls from business owners without having access to the full information needed to make critical decisions in an incredibly tight time frame. This is deeply unfair,” the letter states.
“Most small business owners are part of the middle class. Increasing the capital gains inclusion rate will not only impact the wealthy but many who are in the middle class, and those they employ,” the letter concludes.
