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St. Albert Chamber blasts tax hike during prorogation

Says Canada Revenue Agency is defying rule of law by implementing capital gains change
REAL ESTATE – Real Estate listings have been on the rise over the summer months.
TAXING SITUATION — The outgoing head of St. Albert's chamber of commerce says Canada's tax agency should hold off on a proposed hike to the capital gains tax, which would affect anyone who makes money off the sale of an asset, such as a house. FILE PHOTO/St. Albert Gazette

The Canada Revenue Agency is defying the rule of law by implementing a tax hike Parliament has yet to approve, says the chair of St. Albert’s chamber of commerce.

The Canada Revenue Agency (CRA) confirmed earlier this month it would implement a proposed hike to the capital gains tax announced in the 2024 federal budget. The increase has yet to be signed into law.

A capital gain is profit gained when you sell an asset, such as a house, said outgoing St. Albert and District Chamber of Commerce chair Rosanna Fischer. Previously, if you had capital gains, you had to pay taxes on half of them. Now, if you’re a business, you have to pay taxes on 67 per cent of gains made on or after June 25, 2024. Individuals have to pay this higher rate on any gains in excess of $250,000.

The federal government signalled these changes in a notice of ways and means motion last September. (Parliamentary procedure requires governments to have such a motion accepted before they can propose a new tax.) The motion was not adopted by the House of Commons when it was prorogued on Jan. 6; nor did the government table or pass a law to implement the change.

On Jan. 7, the CRA announced it was already collecting taxes as if the change had been approved.

“Parliamentary convention dictates that taxation proposals are effective as soon as the government tables a notice of ways and means motion,” CRA spokesperson Benoit Sabourin said in an email.

“This approach provides consistency and fairness in the treatment of all taxpayers.”

Sabourin said the government would have to reintroduce its notice of motion (followed by a bill) when the House resumes sitting if it still wanted to pursue it. If it doesn’t, the CRA would go back to the old tax rate and help affected taxpayers figure out what to do next.

Strange situation

This is an unusual situation, as there’s a very real chance that opposition parties will vote down the government and trigger an election as soon as the House resumes, said University of Alberta law professor Chris Sprysak. While an election call would kill this tax change if it is still under debate in the House, whoever wins the election could always reintroduce it once the House resumes.

Sprysak said the capital gains tax hike is technically not law right now, so business owners could file their taxes using the old rate and gamble on the new one not being approved. If the rate change does happen, though, those owners would face steep penalties.

In an email, Jovy Nguyen of the St. Albert accounting firm Nguyen Scott LLP said about five per cent of their clients are affected by the tax hike. They advise clients to file their taxes based on the new rate and to pursue a refund if the change is cancelled.

Fischer argued the CRA should not implement the capital gains tax change.

“The circumstances allowing the CRA to [implement the rate hike] have fundamentally changed,” she said. Parliament is prorogued, the prime minister behind the rate hike is set to resign, and the government behind the tax change is set to fall in a confidence vote.

“The rule of law is not really being respected by the CRA.”

Fischer said this higher rate would discourage investment and affect customers, farmers, business owners, and retirees. If the government goes back to the old rate, the CRA would have collected millions in tax dollars it would then have to refund.

“It doesn’t allow for proper planning going into the next tax season,” Fischer said.

A Jan. 9 analysis by economist Jack Mintz estimated the proposed tax hike, if implemented, would affect about 4.3 per cent of Canadian taxpayers during their lifetime, half of whom earn under $117,000 a year. The hike would discourage new investment by making it more expensive, which would likely lop $90 billion off of Canada’s GDP and reduce employment by 414,000 jobs in the next five years — “a substantial loss to the Canadian economy.”

Fischer called on MPs to direct the CRA to halt the new capital gains rate until the House can debate it and to reconsider how it interprets ways and means motions.




Kevin Ma

About the Author: Kevin Ma

Kevin Ma joined the St. Albert Gazette in 2006. He writes about Sturgeon County, education, the environment, agriculture, science and aboriginal affairs. He also contributes features, photographs and video.
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