A Capital Gains Tax Hike Canada Can’t Afford

The Greater Vancouver Board of Trade is deeply concerned about the federal government’s decision to increase the capital gains tax inclusion rate from 50% to 67%. This increase is being administered by the Canada Revenue Agency (CRA) despite the legislation not being passed in the House of Commons and Parliament being prorogued. Beyond these procedural issues, the tax hike threatens Canada’s competitiveness at a critical moment for businesses, particularly those in Vancouver and across B.C.

Vancouver businesses, like others nationwide, are grappling with rising costs, inflation, and ongoing supply chain disruptions. Meanwhile, external pressures, such as incoming U.S. President Donald Trump’s threatened 25% tariffs on Canadian imports, adds to the strain. If implemented, such tariffs would severely impact Canadian exporters, particularly small- and medium-sized enterprises (SMEs). Against this threat, the higher capital gains tax inclusion rate risks further erosion of Canada’s competitiveness and stifling of essential investment.

A Global Disadvantage

Given the significant amount of uncertainty and the challenging position Canada’s economy is in, the capital gains tax hike could not come at a worse time. The increase pushes Canada into the ranks of the least competitive countries among advanced economies. With the new inclusion rate, Canada’s top capital gains tax rate now ranks between eighth and 13th highest among 37 OECD nations, depending on the province. This shift reduces Canada’s attractiveness as a destination for investment, innovation, and entrepreneurship. It sends the wrong signal about Canada as a place to invest.

Capital gains taxes discourage reinvestment in growth, depriving businesses of resources needed for expansion, innovation, and job creation. For Greater Vancouver businesses, which are already navigating high operational costs and affordability challenges, the hike adds yet another layer of difficulty, creating uncertainty and undermining confidence in long-term planning.

The increased inclusion rate will impact not just corporations but also professionals with equity in their ventures, families managing second properties, and retirees relying on capital gains. The lack of consultation and clarity around this change further compounds uncertainty, making it harder for businesses and individuals to plan effectively for the future.

Time for Action

The Greater Vancouver Board of Trade urges the federal government to change course and announce a commitment to consistent and transparent tax policies. Sudden and unpredictable changes, like the current enforcement of a significant proposed tax change, erode confidence, create uncertainty and disrupt long-term planning.

We have seen a litany of new tax measures recently have that been proposed and implemented in ways that are very damaging to the stability and operations of businesses. The two-month GST break that caused thousands of hours of additional work for businesses, the last minute suspension of bare trust reporting requirements, a so-called “vacant land tax” and the “vacant land tax” and ineffective underused housing tax, digital services tax, and excessive interest and financing expenses limitation (EIFEL) rule are just some of the major changes imposed by the federal government that are greatly increasing the complexity and cost of businesses meeting their tax obligations.

The administrative cost and burden placed on businesses as a result of the changes have been significant. With Greater Vancouver businesses already facing significant challenges, maintaining Canada’s competitiveness, and positioning it as a leader in fostering growth and innovation has never been more urgent. The federal government should be doing everything it can to strengthen Canada and position our country for investment and growth, not enact measures that weaken our country’s economy.