(Bloomberg) -- Pierre Poilievre, the leader of Canada’s Conservative Party, is promising to eliminate the increase to the capital gains inclusion rate if elected.
Poilievre made the announcement in a social media post on Thursday, saying the tax “was a bad idea before President Trump’s tariff threat” and that “it is outright insanity now.”
Poilievre, whose party is polling more than 20 points ahead of the incumbent Liberals, cited a report from the C.D. Howe Institute estimating the increased inclusion rate would reduce employment by 414,000 jobs.
Trudeau’s government introduced the change in last year’s federal budget. It increased the inclusion rate as of June 25, 2024, from 50% to two-thirds for all corporations and trusts, and for individuals earning gains above C$250,000 ($174,000), with some exceptions.
The measure drew widespread condemnation from business groups, and didn’t make it into legislation before Trudeau suspended Parliament this month. The government is expected to fall on a non-confidence vote soon after it resumes sitting March 24, triggering an election. Alternatively, the governing Liberals may call an election after their leadership race to replace Trudeau concludes March 9.
As a result, the increased rate will likely only become law if a new government introduces a bill containing it.
Last week, Canada’s tax authority said it will continue applying the higher capital gains inclusion rate despite Parliament’s suspension, in keeping with its practice of administering proposed legislation.
Poilievre has criticized the tax increase in the past, but had stopped short of pledging to reverse it.
Reversal Risk
The capital gains hike was the largest new revenue item proposed in the Trudeau government’s spring budget. Canada’s fiscal watchdog estimated in August the measure would raise C$17.4 billion in income tax between the 2024-2025 and 2028-2029 fiscal years.
The country is facing a C$48.3 billion deficit for the 2024-2025 fiscal year, equal to 1.6% of gross domestic product.
Speaking to reporters in Delta, British Columbia, on Thursday, Poilievre pledged that reversing the capital gains hike wouldn’t adversely affect federal finances. “I will find the savings so we reduce the deficit,” he said.
Canada’s two largest provinces also earmarked billions in expected revenue from the change.
In its fall economic statement, Ontario estimated its portion of the hike could bring in C$900 million in personal income taxes and C$2.4 billion in corporate taxes between the 2024-2025 and 2026-2027 fiscal years.
“Ontario will work with the Canada Revenue Agency to assess how potential future changes in federal tax policy could impact Ontario’s finances,” Colin Blachar, a spokesperson with the province’s finance ministry, said in an email.
In Quebec, the tax change would create a windfall of C$2.5 billion over five fiscal years, the government estimates. Nearly C$1 billion of that would be booked in the 2024-2025 fiscal year.
Quebec Finance Minister Eric Girard said a future government could allow for capital gains revenue already collected to remain in government coffers.
“If there is a change in the future, I anticipate that the change would be prospective and not retrospective,” Girard said at a conference on Jan. 9.
--With assistance from Mathieu Dion.
(Updates with comments from Poilievre in the eleventh paragraph.)
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