Justin Trudeau’s decision to step down and prorogue parliament will keep his government from implementing its proposed changes to capital gains for now, but Canadians might not be off the hook with tax collectors just yet.
The changes would raise the portion of capital gains on which companies pay tax to two-thirds from one-half. The policy would also apply to individuals with capital gains earnings above $250,000.
The changes were first floated in the government’s April budget, but later broken out from the rest of the fiscal plan in a notice of ways and means motion. That motion never got royal assent because Parliament stalled last year when the Tories began filibustering over the government’s green technology fund.
Proroguing parliament clears the parliamentary order paper, meaning motions that didn’t get royal assent would have to be reintroduced after the House of Commons resumes.
That process could be delayed or completely scuttled if the Liberals don’t survive a non-confidence vote widely expected soon after a new parliamentary session begins on March 24.
However, the proposed capital gains changes have a wrinkle because of the ways and means motion, said Larry Nevsky, the head of law firm Dentons’s tax group in Toronto.
“Only a minister can propose a ways and means motion and once this is done, the government is protected and may collect the revenue through taxes,” he said in a Monday post on LinkedIn.
“The mere tabling of the ways and means motion parliamentary convention provides temporary authority to impose taxes effective immediately.”
In the case of the capital gains changes, Jamie Golombek, the managing director of tax and estate planning with CIBC Private Wealth, said the Canada Revenue Agency previously told accountants last year that it would follow “standard practice” and start applying the proposed measures on capital gains realized on or after June 25, 2024, even though legislation hadn’t passed.
The CRA hasn’t offered an update since the prorogation of parliament and neither it nor the finance ministry immediately responded to questions Monday from The Canadian Press about how it would treat taxes subject to the Liberal’s proposal.
“So people are now going to be in a position to file a 2024 tax return, and they don’t know what to do because we don’t have legislation that has been passed by parliament,” he said.
Golombek is suggesting clients prepare to pay the higher capital gains taxes. He reasons if the legislation doesn’t pass, anyone who pays will likely get a refund, but if it later passes and you didn’t pay, you could be hit with interest fees for being late.
