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Capital gains tax change draws ire from some Canadian entrepreneurs worried it will worsen brain drain – CBC.ca

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A chorus of Canadian entrepreneurs and investors is blasting the federal government’s budget for expanding a tax on the rich. They say it will lead to brain drain and further degrade Canada’s already poor productivity.

In the 2024 budget unveiled Tuesday, Finance Minister Chrystia Freeland said the government would increase the inclusion rate of the capital gains tax from 50 per cent to 67 per cent for businesses and trusts, generating an estimated $19 billion in new revenue.

Capital gains are the profits that individuals or businesses make from selling an asset — like a stock or a second home. Individuals are subject to the new changes on any profits over $250,000.

The government estimates that the changes would impact 40,000 individuals (or 0.13 per cent of Canadians in any given year) and 307,000 companies in Canada.

However, some members of the business community say that expanding the taxable amount will devastate productivity, investment and entrepreneurship in Canada, and might even compel some of the country’s talent and startups to take their business elsewhere.

WATCH | The federal budget hikes capital gains inclusion rate: 

Federal budget adds billions in spending, hikes capital gains tax

3 days ago

Duration 6:14

Finance Minister Chrystia Freeland unveiled the government’s 2024 federal budget, with spending targeted at young voters and a plan to raise capital gains taxes for some of the wealthiest Canadians.

Benjamin Bergen, president of the Council of Canadian Innovators (CCI), said the capital gains tax has overshadowed parts of the federal budget that the business community would otherwise be excited about.

“There were definitely some other stars in the budget that were interesting,” he said. “However, the … capital gains piece really is the sun, and it’s daylight. So this is really the only thing that innovators can see.”

The CCI has written and is circulating an open letter signed by more than 1,000 people in the Canadian business community to Trudeau’s government asking it to scrap the tax change.

Shopify CEO Tobi Lütke and president Harley Finkelstein also weighed in on the proposed hike on X, formerly known as Twitter.

Former finance minister Bill Morneau said his successor’s budget disincentivizes businesses from investing in the country’s innovation sector: “It’s probably very troubling for many investors.”

Canada’s productivity — a measure that compares economic output to hours worked — has been relatively poor for decades. It underperforms against the OECD average and against several other G7 countries, including the U.S., Germany, U.K. and Japan, on the measure. 

Bank of Canada senior deputy governor Carolyn Rogers sounded the alarm on Canada’s lagging productivity in a speech last month, saying the country’s need to increase the rate had reached emergency levels, following one of the weakest years for the economy in recent memory.

The government said it was proposing the tax change to make life more affordable for younger generations and fund efforts to boost housing supply — and that it would support productivity growth.

A challenge for investors, founders and workers

The change could have a chilling effect for several reasons, with companies already struggling to access funding in a high interest rate environment, said Bergen.

He questioned whether investors will want to fund Canadian companies if the government’s taxation policies make it difficult for those firms to grow — and whether founders might just pack up.

The expanded inclusion rate “is just one of the other potential concerns that firms are going to have as they’re looking to grow their companies.”

Benjamin Bergen, president of the Council of Canadian Innovators, said the proposed change could have a chilling effect for several reasons, with companies already struggling to access and raise financing in a high interest rate environment. (Submitted by Benjamin Bergen)

He said the rejigged tax is also an affront to high-skilled workers from low-innovation sectors who might have taken the risk of joining a startup for the opportunity, even taking a lower wage on the chance that a firm’s stock options grow in value.

But Lindsay Tedds, an associate economics professor at the University of Calgary, said the tax change is one of the most misunderstood parts of the federal budget — and that its impact on the country’s talent has been overstated.

“This is not a major innovation-biting tax change treatment,” Tedds said. “In fact, when you talk to real grassroots entrepreneurs that are setting up businesses, tax rates do not come into their decision.”

As for productivity, Tedds said Canadians might see improvements in the long run “to the degree that some of our productivity problems are driven by stresses like housing affordability, access to child care, things like that.”

‘One foot on the gas, one foot on the brake’

Some say the government is sending mixed messages to entrepreneurs by touting tailored tax breaks — like the Canada Entrepreneurs’ Incentive, which reduces the capital gains inclusion rate to 33 per cent on a lifetime maximum of $2 million — while introducing measures they say would dampen investment and innovation.

“They seem to have one foot on the gas, one foot on the brake on the very same file,” said Dan Kelly, president of the Canadian Federation of Independent Business.

WATCH | Could the capital gains tax changes impact small businesses?: 

How could capital gains tax increases impact Canadian small businesses? | Power & Politics

2 days ago

Duration 12:18

Some business groups are worried that new capital gains tax changes could hurt economic growth. But according to Small Business Minister Rechie Valdez, most Canadians won’t be impacted by that change — and it’s a move to create fairness.

A founder may be able to sell their successful company with a lower capital gains treatment than otherwise possible, he said.

“At the same time, though, big chunks of it may be subject to a higher rate of capital gains inclusion.”

Selling a company can fund an individual’s retirement, he said, which is why it’s one of the first things founders consider when they think about capital gains.

LISTEN | What does a hike on the capital gains tax mean?: 

Mainstreet NS7:03Ottawa is proposing a hike to capital gains tax. What does that mean?

Tuesday’s federal budget includes nearly $53 billion in new spending over the next five years with a clear focus on affordability and housing. To help pay for some of that new spending, Ottawa is proposing a hike to the capital gains tax. Moshe Lander, an economics lecturer at Concordia University, joins host Jeff Douglas to explain.

Dennis Darby, president and CEO of Canadian Manufacturers & Exporters, says he was disappointed by the change — and that it sends the wrong message to Canadian industries like his own.

He wants to see the government commit to more tax credit proposals like the Canada Carbon Rebate for Small Businesses, which he said would incentivize business owners to stay and help make Canada competitive with the U.S.

“We’ve had a lot of difficulties attracting investment over the years. I don’t think this will make it any better.”

Tech titan says change will only impact richest of the rich

Ali Asaria, the CEO of Transformation Lab and former CEO of Tulip Retail, told CBC News that the proposed change to the capital gains tax is ‘going to really affect the richest of the rich people.’ (Tulip Retail)

Toronto tech entrepreneur Ali Asaria will be one of those subject to the expanded capital gains inclusion rate — but he says it’s only fair.

“It’s going to really affect the richest of the rich people,” Asaria, CEO of open source platform Transformer Lab and founder of well.ca, told CBC News.

“The capital gains exemption is probably the largest tax break that I’ve ever received in my life,” he said. “So I know a lot about what that benefit can look like, but I’ve also always felt like it was probably one of the most unfair parts of the tax code today.”

While Asaria said Canada needs to continue encouraging talent to take risks and build companies in the country, taxation policies aren’t the most major problem.

“I think that the biggest central issue to the reason why people will leave Canada is bigger issues, like housing,” he said.

“How do we make it easier to live in Canada so that we can all invest in ourselves and invest in our companies? That’s a more important question than, ‘How do we help the top 0.13 per cent of Canadians make more money?'”

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Indian diplomats ‘clearly on notice’ after high commissioner expulsion: Joly

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OTTAWA – Canada isn’t ruling out expelling additional diplomats from India, Foreign Affairs Minister Mélanie Joly suggested Friday following bombshell allegations that Indian diplomats in Toronto, Ottawa and Vancouver were involved in state-sponsored violence targeting Canadian citizens.

Canada expelled the Indian high commissioner and five other diplomats on Monday and when asked at a news conference in Montreal Friday if any more expulsions would follow Joly did not say no.

“They’re clearly on notice,” she said.

The minister said that Canada will not tolerate any foreign diplomats that put the lives of Canadians at risk.

A year ago Prime Minister Justin Trudeau said Canada had clear evidence that Indian agents were connected to the murder of Sikh leader Hardeep Singh Nijjar in British Columbia in June 2023. The allegations suggest India is trying to snuff out a movement to create an independent Sikh state in India known as Khalistan.

On Oct. 14, RCMP Commissioner Mike Duheme rocked the diplomatic relationship further, saying the national police force had launched a special investigative unit last February to investigate multiple cases of extortion, coercion and violence, including murder, linked to agents of the Indian government.

In more than a dozen cases, Canadian citizens were warned about threats to their personal safety and Duheme said the national police force was speaking out to try and disrupt what it deemed a serious threat to public safety.

The six diplomats expelled are persons of interest in the cases, with allegations that diplomats used their position to collect information on Canadians in the pro-Khalistan movement and then pass that on to criminal gangs who targeted the individuals directly.

India has denied the allegations and expelled six Canadian diplomats from New Delhi in return.

Joly said Friday the allegations were extraordinary in Canada.

“That level of transnational repression cannot happen on Canadian soil,” she said. “We’ve seen it elsewhere in Europe, Russia has done that in Germany and the U.K., but we needed to stand firm on this issue.”

The allegations will be studied in more detail by the House of Commons national security committee following a vote by the committee Friday. Joly and Duheme will both be asked to appear, as will Public Safety Minister Dominic LeBlanc

NDP MP Alistair MacGregor, who put forward the motion to launch the study, said the fact the RCMP came out with such “explosive revelations” underscores how serious the situation is.

“The RCMP made a point that they were doing this because some individuals in Canada had their lives directly in danger and the threat reached such a level they felt compelled to ignore the traditional way of going through the judicial process and make these accusations public,” he said.

Canada’s allegations were followed Thursday by charges announced by the U.S. Justice Department against an Indian government employee who is accused in an alleged foiled plot to kill a Sikh separatist leader living in New York City.

U.S. authorities say Vikash Yadav directed the New York plot from India. He faces murder-for-hire charges in a planned killing that prosecutors have previously said was meant to precede a string of other politically motivated murders in the United States and Canada.

The Indian government didn’t immediately provide comment on the U.S. charge.

American-Canadian lawyer Gurpatwant Singh Pannun, a lawyer and dual Canadian and U.S. citizen, said in a statement that he was the target of the alleged murder plot in New York. He said he was targeted because he is a lawyer for Sikhs for Justice and was helping to organize votes in a non-binding referendum on the creation of an independent Sikh state.

Nijjar helped organize a similar referendum in B.C. prior to his death.

The House committee Friday also voted to call Brampton Mayor Patrick Brown to testify, as well as other candidates from the 2022 Conservative leadership contest. A report released in June by the National Security and Intelligence Committee of Parliamentarians (NSICOP) contains a redacted paragraph that details alleged Indian interference in a Conservative leadership contest. A specific year is not mentioned.

The Conservatives have said they have been given no information about any such interference.

The committee is also now considering a second NDP motion calling for all party leaders to apply for a top-secret security clearance within 30 days, along with a Conservative amendment to demand Prime Minister Justin Trudeau release the names of parliamentarians listed in top-secret documents as being engaged in or at-risk of foreign interference.

At the foreign interference inquiry this week Trudeau said Conservative Leader Pierre Poilievre refused to get the clearance that would allow him to access the names of Conservatives from those documents, while Poilievre accused Trudeau of lying and demanded he make all the names public.

Trudeau acknowledged the documents include the names of members of other parties, including the Liberals, but said if Poilievre doesn’t get the clearance that is needed to know who is at risk he can’t take any steps to prevent or limit the impact.

Manitoba Conservative MP Raquel Dancho told the committee that Poilievre getting a briefing would be a “gag order” against criticizing the government on foreign interference.

“We can put this to bed, it’s rapidly devolving into some McCarthy witch-hunt as a result of the prime minister’s actions and we can clear this up today by releasing the names,” Dancho said.

This report by The Canadian Press was first published Oct. 18, 2024.



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B.C. faces a rain-soaked election day after a campaign drenched in negativity

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VANCOUVER – British Columbians go to the polls on Saturday after a too-close-to-call campaign that saw David Eby’s New Democrats and John Rustad’s B.C. Conservatives tangle over housing, health care and the overdose crisis — as well as plastic straws and a billionaire’s billboards.

Forecasters say election day will be soaked in several parts of the province by heavy rain from an atmospheric river system.

But the campaign has already been drenched in negativity, with Eby and Rustad each devoted to telling British Columbians why they shouldn’t vote for the other.

The NDP’s election platform mentions Rustad more than 50 times, compared to only 29 times for Eby, while the B.C. Conservative platform names Eby 50 times, and Rustad only 11 times.

“I hope we never see another election like this,” Eby said this week in Nanaimo, describing the tone of the campaign where he felt compelled to tell voters about controversial public statements made by Rustad and some of his candidates.

“We don’t call people who are gay ‘groomers,'” he said. “We don’t tell Indigenous people that what they experienced in residential schools wasn’t real. We don’t propose that health-care professionals be put in front of an international tribunal similar to the trial of the Nazis called Nuremberg 2.0.”

Rustad, who campaigned in Nanaimo on the same day Eby visited the Vancouver Island city, said the NDP leader has consistently attempted to shift focus away from what he says are the real issues facing the province — mismanagement of the economy, the crumbling health-care system and the ongoing drug overdose crisis that has resulted in more than 15,000 deaths since 2016.

“I don’t know why, I guess as premier he thinks it’s OK to be lying to the people of B.C.,” said Rustad. “The premier of a province like B.C. should be able to be out, being straight up with people and telling them the truth as opposed to lies.”

Regardless of the outcome, the election will go down as a sea change for B.C. politics, with the Conservatives poised to either form government or become the official opposition, after the implosion of the BC United party under Kevin Falcon, who halted his party’s campaign to support Rustad and avoid centre-right vote splitting.

Polls have put the NDP and the B.C. Conservatives locked in a close battle. It’s a remarkable turnaround for the Conservatives, who won less than two per cent of the vote in the last provincial election.

Eby and Rustad spent Friday making last-ditch pitches for support in vote-rich Metro Vancouver.

Eby started in Coquitlam, while B.C. Conservative Leader John Rustad was scheduled to be in North Vancouver.

“We have left nothing on the table,” said Eby, adding every vote will count Saturday. “I have really no regrets about the campaign.”

On Friday, the Conservatives said that if elected they would launch “a full public inquiry” into the use of taxpayer money to buy drugs on the dark web.

That is a reference to a so-called “compassion club” that was operated by the Vancouver-based Drug User Liberation Front to buy drugs including methamphetamine, cocaine and heroin, test it for safety and then sell it to its members.

The club was ultimately shut down and the group’s founders arrested and charged with trafficking.

“This inquiry will seek to uncover who knew what, when they knew it, and what actions were or weren’t taken by the New Democrats, including Premier David Eby,” the party said in a statement.

Rustad was not available to reporters on Friday, but he was holding photo opportunities in Metro Vancouver.

Green Leader Sonia Furstenau was in Victoria, where she is looking to capture a seat in the NDP stronghold of Victoria-Beacon Hill. She has acknowledged the Greens won’t win the overall election, but is hoping to retain a presence in the legislature where the party currently has two members.

The campaign’s only televised debate saw Furstenau tell voters that Eby and Rustad were more closely aligned than people may believe on issues including support for the fossil fuel industry and placing people with mental health and addiction issues into involuntary care.

The month-long campaign has featured regular controversies for the Conservatives surrounding past comments by Rustad and his candidates.

Rustad dropped several potential candidates before the start of the official campaigning period over extreme views posted on social media.

But during the campaign he continued to support Surrey-South candidate Brent Chapman, who called Palestinian children “inbred” and “time bombs” in a 2015 Facebook post.

Eby mentioned Chapman during visits to two mosques in Surrey.

“John Rustad and the B.C. Conservatives are standing with that candidate,” he said at the Guilford Islamic Centre. “They should have got rid of him.”

Eby said the NDP are running two Muslim candidates in the election, including candidate Haroon Ghaffar in Surrey-South against Chapman.

“It’s important to have diverse candidates in the legislature,” said Eby, adding B.C. has yet to elect a Muslim.

Eby faced tough questions from people at the mosque about teaching sex education at schools and the rise of Islamophobia.

Rustad also stood by North Coast-Haida Gwaii candidate Chris Sankey, who suggested vaccines caused AIDS by posting about “Vaccine Acquired Immunodeficiency Syndrome” during the COVID-19 pandemic.

Then there was Vancouver billionaire Chip Wilson, co-founder of the Lululemon athletic clothing line.

Wilson injected himself into the campaign with a series of anti-NDP billboards outside his waterfront Vancouver home, located in Eby’s Vancouver-Point Grey riding.

Eby and the NDP embraced the moment, saying Eby was on the side of ordinary people in B.C. struggling to make ends meet and not the owner of a home assessed at more than $81 million.

Rustad said he supported entrepreneurs like Wilson, but they couldn’t expect a break on their property taxes.

Rustad’s campaign promise to reverse a ban on plastic straws prompted Eby to begrudgingly agree that “paper straws suck,” but he suggested the B.C. Conservative leader was trying to stir up controversy by diverting attention from major issues facing the province.

Election day coincides with an atmospheric river system that is dumping heavy rain across much of the province.

Furstenau used the weather event to highlight her party’s climate promises, saying the Greens are the only party that offers a serious response to the climate crisis.

“It’s very interesting the timing of an atmospheric river arriving right on the moment of this election campaign, an election campaign where we have one party led by a climate denier and another party led by a climate delayer,” she said.

This report by The Canadian Press was first published Oct. 18, 2024.



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AFN votes on way forward after $47.8 billion child welfare reform deal is defeated

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OTTAWA – The executive team from the Assembly of First Nations will meet in the coming days to discuss how to proceed with new negotiations for a child welfare reform deal after chiefs voted against the government’s proposed $47.8 billion agreement at a meeting in Calgary Thursday.

AFN National Chief Cindy Woodhouse Nepinak, who had helped negotiate the deal and pushed for it to be approved, was blunt in her assessment of the outcome in her closing remarks to the special chiefs assembly Friday.

“We also recognize the success of the campaign that defeated this resolution. You spoke with passion, and you convinced the majority to vote against this $47.8-billion national agreement,” she said.

“There is no getting around the fact that this agreement was too much of a threat to the status quo, to the industry that has been built on taking First Nations children from their families.”

Cindy Blackstock, executive director of the First Nations Child and Family Caring Society which helped launch a discrimination case against Canada that led to the deal, said “that’s an unfortunate characterization of the chiefs taking a look at the agreement with their own experts and own legal staff and making an informed decision that’s best for them.”

“I respect the National Chief, and I look forward to kind of working with her and everyone to make sure that we get this across the finish line,” Blackstock said.

The defeated deal was struck between Canada, the Chiefs of Ontario, Nishnawbe Aski Nation and the Assembly of First Nations in July after a nearly two-decades-long legal fight over the federal government’s underfunding of on-reserve child welfare services.

The Canadian Human Rights Tribunal said that was discriminatory because it meant kids living on reserve were given fewer services than those living off reserve.

The tribunal tasked Canada with reaching an agreement with First Nations to reform the system, and also with compensating children who were torn from their families and put in foster care.

The $47.8 billion agreement was to cover 10 years of funding for First Nations to take control over their own child welfare services from the federal government, create a body to deal with complaints and set aside money for prevention, among others.

Before the deal was announced in July, three members of the AFN’s executive team wrote letters to the national chief saying they feared the deal was being negotiated in secret, and asked for a change in course. They also said the AFN was attempting to sideline the First Nations Child and Family Caring Society from negotiations.

Those concerns largely remained when the deal was announced in a closed-door meeting at the AFN’s last gathering, with chiefs questioning how the reforms will work on the ground, and service providers saying their funding levels will be significantly cut which would impact their ability to do their work effectively.

Blackstock found support from 267 out of 414 chiefs who voted against a resolution calling for the deal to be approved.

Squamish Nation chairperson Khelsilem introduced a resolution Friday calling for a new negotiation mandate from chiefs.

“This is a lesson for the Assembly of First Nations, for the staff and legal, for the advisers, for the portfolio holder who has worked on this deal,” he said.

“The way we got here was not the way we should have done this. There’s a better way forward.”

His resolution, and another one from child welfare advocate and proxy chief for Skawahlook First Nation, Judy Wilson, called for the creation of a children’s chiefs’ commission comprised of leadership from all regions in the country to negotiate a new deal and provide oversight, along with a new legal team.

It also calls for chiefs to be given at least 90 days to review an agreement before voting on it, with the document to be made available in both official languages.

Khelsilem said the new negotiation mandate was developed with about 50 leaders from across the country, and hopes it will set a positive path forward in the best interest of kids in care after a fairly testy special chiefs assembly. He also said the new mandate will address “flaws” highlighted by chiefs across the country, and will ensure there is more transparency.

“We didn’t have to be in a situation where we had to vote down a flawed agreement and then create a direction to be able to get this back on track,” he said to chiefs.

“We didn’t have to be here if the process that was used to create the (final settlement agreement) was a meaningful process that meaningfully respected and consulted First Nations, that allowed for meaningful dialogue to improve that agreement.”

In a statement, a spokesperson for the minister of Indigenous Services said Canada worked closely with First Nations on this deal, and as it was being amended.

“The agreement that chiefs in assembly rejected yesterday is the final product of those close negotiations,” Jennifer Kozelj said.

“Canada remains steadfast in its commitment to reform the First Nations child and family services program so that children grow up knowing who they are and where they belong.”

Blackstock said that Indigenous Services Minister Patty Hajdu or Prime Minister Justin Trudeau ought to have been at the gathering in Calgary if they stood by the agreement.

In a statement Friday, the Assembly of First Nations Quebec-Labrador said they’re grateful for the work that has been done to date, but that chiefs need to work together to amend the deal so it respects diversity of communities and eliminates systemic discrimination.

“As chiefs, we have a sacred responsibility to protect our children and families for the next seven generations,” said interim regional chief Lance Haymond.

Blackstock says that even though the deal was defeated, it doesn’t mean they’re starting from the bottom.

“We have so much to build on, including the draft final settlement agreement,” she said. “This is a reset to ensure that First Nations kids all succeed.”

This report by The Canadian Press was first published Oct. 18, 2024.



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