Liberal capital gains tax changes challenged in court
The recent changes to the capital gains tax by the Liberal government are facing legal challenges in court. The Canadian Taxpayers Federation has filed for a judicial review of the policy, arguing that the increases to the capital gains inclusion rate should not be enforced as they were never formally passed into law.
Devin Drover, a lawyer representing the organization, stated, “This tax grab violates the fundamental principle of no taxation without representation. That’s why we are asking the courts to put an immediate stop to this bureaucratic overreach.”
The changes announced in April’s federal budget raised the taxable amount of capital gains, increasing the inclusion rate from one-half to two-thirds for capital gains above $250,000 for individuals, corporations, and trusts. Although the legislation to officially introduce these changes was before the House of Commons, it is now essentially inactive after Prime Minister Justin Trudeau prorogued Parliament.
Despite this, the Canada Revenue Agency (CRA) is still implementing the higher inclusion rate due to a “ways and means” motion passed in Parliament. The judicial review is seeking to halt the collection of taxes at the increased rate until the changes are approved by Parliament through proper legislation.
The case was filed on behalf of an Ontario couple who sold a property that they had previously rented to their adult children. The couple is challenging the validity of the increased inclusion rate and its impact on their finances.
Several prominent figures, including Liberal leadership hopeful Chrystia Freeland and former Bank of Canada governor Mark Carney, have distanced themselves from the policy. Freeland, who initially introduced the changes as finance minister, now plans to scrap them if she wins the leadership race. Carney’s spokesperson acknowledged that the changes “sent the wrong signal” but did not confirm his stance on reversing them.
Conservative Leader Pierre Poilievre has criticized the capital gains tax increase and pledged to roll it back if his party forms the next government. The Conservatives are also calling on the government to cease the collection of taxes at the higher inclusion rate until proper legislation is passed.
The legal battle over the capital gains tax changes highlights the ongoing debate over tax fairness and economic policy in Canada. The outcome of the judicial review will have significant implications for taxpayers and the government’s fiscal strategy moving forward.
