Trudeau Stands by Capital-Gains Tax Hike That Businesses Hate

(Bloomberg) -- Prime Minister Justin Trudeau says the “broad lines” of the government’s plan to hike Canada’s capital-gains tax won’t change, even as some of the details are still being ironed out.

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The government is sticking with its plan to increase the tax on companies, and on individuals in years when they record capital gains of more than C$250,000 ($183,000). Currently, half of those gains are subject to corporate or personal income tax; that will rise to two-thirds.

Finance Minister Chrystia Freeland has yet to introduce legislation to make the tax change, leaving some to speculate that she and Trudeau were having second thoughts. Business groups have decried the proposal, warning it will worsen the country’s productivity and investment woes. Conservative Party Leader Pierre Poilievre said last week that it “looks like” Trudeau is backing down on the tax hike.

Not so, Trudeau told reporters in Philadelphia after delivering a speech to the Service Employees International Union convention. The prime minister’s position is that the tax change is about asking the wealthy to contribute more to society. “There are details to be worked out, but the broad lines are very clear and will be kicking in as of June 25.”

The government will begin the legislative process in the coming weeks, before Parliament rises for its summer break next month, Freeland said Tuesday. “It’s important to get things right,” she said.

The government has said it expects to raise nearly C$20 billion in additional tax revenue over five years — though some of that is because it expects a rush of asset sales to take place before June 25 as people try to beat the tax hike.

Benjamin Bergen, president of the Council of Canadian Innovators, said in an interview that he hoped the government would “come to its senses” and scrap the capital-gains hike entirely.

The government would not have had to rely on a tax hike to raise revenue if it had done a better job of fostering economic growth, he said. “Now’s the moment to actually be making it easier for firms to be able to create prosperity and opportunity,” Bergen said. There are some exemptions to the new capital gains rate to reduce the potential tax burden on small entrepreneurs.

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