Canada’s capital gains tax should be reduced or abolished as a number of countries have done, according to an economic note published this week by the Montreal Economic Institute, an independent, non-partisan, not-for-profit research and educational organization.
“Capital formation is one of the foundations of economic growth. Yet investment in Canada has fallen 18 per cent since 2014. Now that the oil industry boom is behind us, it’s obvious that Canada has a chronic problem. The capital gains tax reduces the availability of capital, and makes it more expensive for companies. Who ends up paying the price? Workers in particular, through fewer jobs and lower wages,” explains Mathieu Bédard, economist at the MEI and author of the publication.
Prior to 1972, Canada didn’t tax capital gains at all. The Carter Commission Report recommended 100 per cent taxation of capital gains. But the law, as originally introduced, ultimately decided to tax only 50 per cent of gains. Subsequent governments increased the inclusion rate to 66 2/3 per cent in 1988, then increased it again to 75 per cent in 1990. A decade later, it was dropped back down again to 66 2/3 per cent on Feb. 28, 2000 and then further reduced on Oct. 18, 2000 to 50 per cent, the inclusion rate that still applies today.
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