However, the federal government will proceed with the planned increase in the lifetime capital gains exemption limit to C$1.25 million ($871,930.80) for the sale of small business shares, as well as farming and fishing properties, according to a statement from Carney’s office.
Since taking office, Carney has been rolling back unpopular policies that contributed to the Liberal Party’s declining poll numbers under former Prime Minister Justin Trudeau. Recent polling suggests the party is now either leading or in a tight race with the opposition Conservatives, and Carney is expected to call elections soon.
“Cancelling the hike in capital gains tax will catalyze investment across our communities and incentivize builders, innovators, and entrepreneurs to grow their businesses in Canada,” Carney said.
The now-abandoned proposal, introduced in April last year, sought to raise the taxable portion of capital gains from 50% to 66.7% for businesses and individuals with annual capital gains exceeding C$250,000 ($174,605). Originally set to take effect on June 25, the measure was never enacted into law.
The proposal faced fierce opposition from business leaders, economists, and opposition parties, who warned it could deter investment and harm economic growth. However, its cancellation could significantly impact government revenues, widening an already growing deficit. The tax increase was projected to generate nearly C$19.4 billion over five years, with some of the funds earmarked for affordable housing initiatives.
Despite the financial implications, the government is betting that reversing the tax hike will boost investor confidence and economic activity.