OTTAWA — Mark Carney’s recent victory in the Liberal leadership race puts the final nail in the coffin of Ottawa’s controversial plan to hike the inclusion rate on capital gains. During his victory speech on March 10, 2025, Carney confirmed his intention to cancel the proposed increases, which were originally slated to take effect on June 25, 2024, as part of the federal budget presented last spring.
The Liberal government had introduced this plan as a way to compel wealthy Canadians and corporations to pay more taxes on capital gains—defined as the profit made when selling assets, like stocks or property. Under the original proposal, the tax inclusion rate would have risen from the current 50 percent to two-thirds. Individual Canadians would have been liable for higher taxes on gains exceeding $250,000 per year, and businesses would face this increased assessment on all capital gains.
Despite plans, the Liberal government experienced delays. Earlier this year, Finance Minister Dominic LeBlanc announced the implementation date would be postponed to January 1, 2026, but no legislation passed to finalize this change. Now, with Carney taking the reins, the capital gains hike stands officially shelved.
This abrupt policy turnaround has left many seeking clarity. Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth, remarked, “The capital gain tax change is dead, and I think people will be very happy about it.” Yet, confusion prevails among taxpayers, especially with this tax season underway. Reports indicate individuals sold assets like stocks or expensive properties to avoid potential tax increases, thinking they had to act quickly before the proposed deadline.
Echoing Golombek’s concerns, the Canada Revenue Agency (CRA) previously created forms reflecting the proposed increases before reverting to the existing inclusion rates. Now, with the CRA advising taxpayers to hold off on filing 2024 returns if reporting capital gains, the situation becomes even more perplexing.
Benjamin Bergen, CEO of the Council of Canadian Innovators, expressed relief at the rollback of the capital gains changes but called the move bittersweet. “The damage has been done to Canada’s reputation as a place to do business,” Bergen said. The initial proposal suggested to entrepreneurs and investors alike, according to Bergen, reflects Canada’s deteriorated business climate.
During his campaign, Carney recognized these sentiments. “We will stop the hike in the capital gains tax because we think builders should be incentivized for taking risks and rewarded when they succeed,” he stated, aligning his leadership vision with the interests of the innovation sector.
Experts had predicted the original tax changes could generate about $19.4 billion over five years, intended to balance spending plans within the 2024 federal budget. This figure was later adjusted by the Parliamentary Budget Officer to approximately $17.4 billion. Notably, Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa, suggested the plans were more about covering fiscal gaps than part of a cohesive tax strategy. “I still think it was used to plug a fiscal hole, not because there was some grand strategy on tax policy,” Khan noted.
Despite the proposed capital gains hike being scrapped, the damage wrought on the public perception of Canada as a viable business location is noteworthy. The uncertainty surrounding the tax changes created wider concerns within the technology sector. Bergen stressed, “Uncertainty always creates concern and challenges for people trying to build firms.” He advocated for policies focusing on supporting domestic industries, particularly with growing trade tensions with the United States.
Simultaneously, the CRA faces operational hurdles as its systems adapt to the updated tax structure. The agency announced deadlines to relieve possible penalties for individual taxpayers until June 2 for 2024 returns. Financial institutions were also granted extended time to file tax slips without incurring fees, acknowledging adjustments made following the government’s sudden policy shifts.
Ryan Minor, director of tax for CPA Canada, pointed out the necessity for clarity for citizens filing early, stating, “Taxpayers who are not reporting capital disposition for 2024 still must file their returns by April 30.” He indicated this could complicate the filing experience for many, particularly for lower-income earners who seek refunds as soon as possible.
With all these changes reverbering through the Canadian economic and political landscapes, the outcome of Carney’s leadership rises to another precipice. Will his administration find new pathways to restore confidence among innovators and entrepreneurs? Will other sectors feel the impacts of his decisions as they ripple through various industries?
The focus now shifts to how his policies will shape the future of Canada’s taxation environment and business climate, aiming for sustainable growth and confidence. The actions taken and the road mapped out could either cement this legacy or draw lines of division as discussions evolve around economic landscapes.
For now, the stark realization dawns: the capital gains tax hike is off the table, but the repercussions of its mere proposal continue to complicate the tax filing season for many Canadians.