Canadians concerned about the capital gains tax increase will be able to breathe a temporary sigh of relief.
The Liberals announced on Friday that the capital gains tax hike will be deferred until next year. Minister of Finance Dominic LeBlanc said that the deferral will provide certainty to Canadians as the tax season approaches.
“Given the current context, our government felt that it was the responsible thing to do,” he said.
The postponement comes one week after the Canadian Taxpayers Federation began a legal challenge against the Canada Revenue Agency to stop them from enforcing a capital gains tax hike that had not gone through Parliament.
Legal counsel for the Canadian Taxpayers Federation, Devin Drover, said the CRA pushing the tax hike violated the constitution and was “illegal and undemocratic.”
Federal director of the Canadian Taxpayers Federation, Franco Terrazzano, told True North that taxpayers nationwide forced the Liberals to back down.
“It’s Parliament’s job to approve tax increases. But the government failed to introduce the legislation, debate the legislation, pass the legislation or proclaim the legislation into law. And with an election right around the corner, it likely never will,” he said.
Terrazzano said that the Canadian Taxpayers Federation taking the Liberals to court over the illegal tax hike was an important factor in the recent delay.
“We aren’t going to let unelected bureaucrats take more money from Canadians through an illegal tax grab. The government knew it was wrong, and we are right,” he said.
The capital gains tax change would raise the inclusion rate for capital gains tax from 50% to 66.7% on amounts exceeding $250,000. The Liberals estimated receiving an extra $19.4 billion in revenue from raising the tax.
A previous report highlighted that the capital gains tax hike could cost around $90 billion in lost GDP and the loss of 414,000 jobs — resulting in a 3% real per capita GDP decline.
The taxpayers’ advocacy group called the delay a huge win for Canadian taxpayers but said the fight isn’t over.
“Taxpayers across Canada forced the Trudeau government to back down from enforcing this illegal and undemocratic capital gains tax hike this year, but the fight will continue until the policy is scrapped completely,” said Terrazzano.
Terrazzano confirmed that the court fight isn’t over either. He said the federation will keep fighting back in the court of public opinion and the court of law.
“We will keep pushing to establish a firm precedent: no taxation without representation,” he said.
Even Liberal leadership candidate Chrystia Freeland has turned against the capital gains tax. Despite implementing the tax herself, she began her campaign by backtracking on the capital gains tax and the carbon tax.
Conservative Leader Pierre Poilievre said he would reverse the capital gains tax hike if he wins the next federal election.
Over half of small businesses warned they would be negatively affected, while almost a quarter of Canadians said the same.
Now that the hike is delayed until at least Jan. 1, 2026, the next federal election—expected before Oct. 2025—will occur before it can be implemented.
