A controversial increase to the capital gains inclusion rate is now in effect despite strong pushback from small businesses, farmers and medical professionals.
Starting Tuesday, individuals with capital gains of more than $250,000 will be subject to an inclusion rate of 67 per cent, up from 50 per cent before. For corporations, all capital gains are now subject to the two-thirds inclusion rate.
The federal government says the move will improve tax fairness and increase federal revenues by $19.4 billion over five years, with a bulk of that money flowing into federal coffers this year. Budget 2024 shows the change to the inclusion rate will bring in an estimated $6.9 billion dollars this fiscal year.
The tax change applies to profits made from the sale of secondary properties or investments, including stocks or bonds and family cottages. The new inclusion rate does not change the tax rate itself, which will continue to be an individual or corporation’s marginal rate, but increases the taxable portion of that gain.
“Do you want to live in a country where we make the investments we need — in health care, in housing, in old age pensions — but we lack the political will to pay for them, and choose instead to pass a ballooning debt onto our children?” Finance Minister and Deputy Prime Minister Chrystia Freeland asked in Toronto earlier this month.
EY Canada tax policy leader Fred O’Riordan says the government appears to be using this tax change to keep the federal deficit below $40 billion.
“Instead of doing (it) immediately effective Budget Day, which is why most of them are done, they gave that window of time a couple of months until June 25,” O’Riordan said. “A lot of us believe that the main reason they did that was to encourage people to crystallize, to realize capital gains earlier than they might otherwise and then bring additional tax revenue into this fiscal year.”
Law firms and other corporations who regularly handle capital gains say that since the measures were announced in Budget 2024, clients have rushed to realize their gains before the changes took effect on June 25.
“I have heard from some Canadians who are concerned,” Freeland said in Toronto earlier this month. “No one likes paying more tax, even those who can afford it the most.”
But while the Liberals contend this increase will only impact 0.13 per cent of Canadians with capital gains income, an array of groups from small businesses to medical professional and farmers have called for immediate changes.
“Politically speaking, you would think there would be some room for manoeuvring, but they haven’t budged at all and you’ve got to think that it’s because they really want the revenue,” O’Riordan said.
Details about the change were included in what is called a “Notice of Ways and Means Motion” that was approved by the House before it rose in June. The legislative details of the tax change are expected to be released later this summer, with the bill itself voted on when Parliament returns in the fall.
Although the change is now in effect, O’Riordan believes the government still has time to make carve-outs.
“They really painted themselves in a corner but who knows,” he said. “There’s still wiggle room there if they want to change their mind.”
Farmers say increase ‘targets’ them
Last week, a survey released by the Canadian Federation of Independent Business (CFIB) found that half of all small-business owners in Canada will be affected by the change and another 45 per cent said the tax would affect the investments they hold privately.
One of the loudest groups of small businesses pushing the federal government to reverse course are farmers who say family-owned farms across Canada will be negatively affected.
Günter Jochum’s family owns and operates a wheat farm just outside Winnipeg and calls the change “appalling,” He says the increase will make it harder to transfer the family farm to his daughter, Fiona, when she’s ready to take over.
While farmers do have to pay capital gains on the profits from the sale of their farmland, a portion of the property considered by the Canada Revenue Agency to be a primary residence is excluded.
“My parents are still drawing from the farm. I myself draw from the farm,” he said. “These changes will just mean that there is more of a tax burden now and it will make it more difficult for my daughter to maintain the farm and be able to satisfy all three households.”
Jochum, who is also president of the Wheat Growers Association, said the tax change makes farming less attractive and could result in more farms being sold outright instead of passed on to the next generation.
“I get what they’re trying to do; they’re trying to hit the really big corporations who make multibillion dollars,” Jochum said. “That’s not farmers who are small businesses, and we somehow get lumped into that and that is very dangerous.”
The government recently increased the Lifetime Capital Gains Exemption (LCGE) that allows tax-free capital gains up to a new $1.25 million on the sale of a qualified property. Prior to June 25, the LCGE limit for small business shares, farms and fishing properties was $1.016 million.
While that cumulative lifetime exemption is helpful, Jochum argues it is simply not enough. Jochum says his accountant advised him that despite programs like the LCGE meant to help farmers, he should expect to pay about 30 per cent more on the eventual sale of his farm.
“You want to stick everything into your business to build it up and take it to where it is today,” Jochum said, adding he has chosen to invest in his farm rather than into an RRSP. “For the government to come along and tap into my retirement, and say, ‘Yeah, we want to tax your retirement 30 per cent more,’ is really offensive.”
Doctors ‘disappointed’ with tax hike
Medical professionals have also joined the chorus of voices calling for change. Most family doctors are considered corporations for tax purposes and will now be subject to the higher inclusion rate.
Canadian Medical Association president Dr. Joss Reimer says she is “disappointed” the government made no exceptions for family doctors. Unlike individuals, the higher inclusion rate affects all capital gains earned by corporations. Reimer fears that difference will impact the bottom line of many family practices and could make physicians less likely to enter or stay in family practice.
“We know that there are so many Canadians who already don’t have access to a health-care provider,” she said. “Anything that’s going to cause any of our physicians to consider not doing family medicine or to decrease their hours is really concerning.”
Reimer says she is hopeful the government will engage in conversations with members of the medical community over the summer. One solution, she says, is allowing family physicians to use their personal $250,000 annual exemption for their corporation.
“Then we would still be taxed just like everybody else, but it treats us more like the individuals that we are,” she said. “We’re not the same as the big companies who have their shareholders … We’re just trying to save for our retirements, from maternity leave or sick leave, all of those things that physicians aren’t usually eligible to get.”
New measures for entrepreneurs
The government’s ways and means motion also includes a new Canadian Entrepreneurs’ Incentive that was promised in the spring budget.
This measure will reduce the inclusion rate to 33 per cent on a lifetime maximum of $2 million on eligible capital gains. The limit will start with $200,000 in 2025 and increase by that amount every year until it reaches the $2-million threshold in 2034.
Entrepreneurs may also use the total lifetime capital gains exemption of $1.25 million, resulting in a combined exemption of at least $3.25 million.
What is not changing
The measures coming into effect today will not impact capital gains on tax-sheltered savings that are currently exempt.
This includes:
Capital gains from selling a principal residence
Income earned in tax-sheltered savings accounts, like tax-free savings accounts (TFSA), First Home Savings Account (FHSA), registered retirement savings plan (RRSP) or registered education savings plan (RESP)
Pension income or capital gains earned by registered pension plans
The first $250,000 earned in capital gains will continue to be subject to the 50 per cent inclusion rate for individuals.
VANCOUVER – Jesse Marsch issued Canada’s men’s soccer squad a challenge — get physical.
The edict came after the Canadians surprised many at this summer’s Copa America tournament, making it through to the semifinals. As his players departed for their professional clubs, the head coach wanted them thinking about continued growth.
“I challenged them to be more physically present in the matches that they played in,” Marsch said. “I’ve tried to encourage all the players to sprint more, to win more duels, to win more balls, to be more dynamic in matches.”
When Canada reconvened for a pair of friendlies last week, the coach saw some players had already heeded his call, including Vancouver Whitecaps product Ali Ahmed.
The 23-year-old midfielder started in both Canada’s 2-1 victory over the United States on Saturday and Tuesday’s 0-0 draw against Mexico.
“I’m really happy for him,” Marsch said. “I think he’s still young and still has a lot of room and potential to continue to grow.”
Playing under Marsch — who took over as head coach in May — has been a boon for the young athlete, currently in his second full season with Major League Soccer’s Whitecaps.
“Jesse has a very clear way of playing,” Ahmed said. “And I think the way we’ve been training and the way we’ve been growing as a group, it’s been helpful for me.”
The reward of getting minutes for a national team can spur a player’s growth, including Ahmed, said Whitecaps head coach Vanni Sartini.
“Of course that fuels him inside to say ‘Hey, I want to be a better player. I want to get to that stage,'” said Sartini.
Vancouver had six players — including Ahmed — away on international duty during its 0-0 draw against Dallas FC on Saturday. The absences are a good problem to have, Sartini said.
“Because we have players that are close to the national team, we have a lot of players that development is faster, better, bigger than it would have been if they hadn’t been called,” he said.
Born in Toronto, Ahmed came up through the Whitecaps’ academy system and played for Vancouver’s MLS Next Pro side before cementing his spot on the first team in 2023. He put up two goals and two assists across 22 regular-season games, and added another goal and another helper in 19 appearances this year.
Taking the next step will require the five-foot-11, 154-pound Ahmed to push himself physically, Marsch said.
“Tactically, he’s technically gifted,” the coach said. “I’ve told him he’s got to get in the gym more.
“There’s a lot of these little things where too many guys, they still look like kids and we need to help them look like men and play like men. And that’s what the high standards of the game are about.”
Marsch has quickly adjusted to recalibrating standards in his short time with Team Canada. Since taking over the squad in May, the coach said he’s learned the players are smarter and more capable than he originally thought, which forces the coach to constantly recalibrate his standards.
“That’s my job right now, to keep raising the level of the demands,” he said.
The way 40th-ranked Canada is viewed on the international stage is evolving, too.
“I think we’re changing the perception on the way we’re playing now,” he said. “I think beating the U.S. — it would have been nice to beat Mexico as well — the way we did, the way that we performed at Copa, I think teams are starting to look at us differently.
“Right now, I think we’re focused on ourselves. We’re definitely trying to be the best in CONCACAF and we have higher goals as well.”
This report by The Canadian Press was first published Sept. 12, 2024.
An investigator gave the World Anti-Doping Agency a pass on its handling of the inflammatory case involving Chinese swimmers, but not without hammering away at the “curious” nature of WADA’s “silence” after examining Chinese actions that did not follow rules designed to safeguard global sports.
WADA on Thursday released the full decision from Eric Cottier, the Swiss investigator it appointed to analyze its handling of the case involving the 23 Chinese swimmers who remained eligible despite testing positive for performance enhancers in 2021.
In echoing wording from an interim report issued earlier this summer, Cottier said it was “reasonable” that WADA chose not to appeal the Chinese anti-doping agency’s explanation that the positives came from contamination.
“Taking into consideration the particularities of the case, (WADA) appears … to have acted in accordance with the rules it has itself laid out for anti-doping organizations,” Cottier wrote.
But peppered throughout his granular, 56-page analysis of the case was evidence and reminders of how WADA disregarded some of China’s violations of anti-doping protocols. Cottier concluded this happened more for the sake of expediency than to show favoritism toward the Chinese.
“In retrospect at least, the Agency’s silence is curious, in the face of a procedure that does not respect the fundamental rules, and its lack of reaction is surprising,” Cottier wrote of WADA’s lack of fealty to the world anti-doping code.
Travis Tygart, the CEO of the U.S. Anti-Doping Agency and one of WADA’s fiercest critics, latched onto this dynamic, saying Cottier’s information “clearly shows that China did not follow the rules, and that WADA management did nothing about it.”
One of the chief complaints over the handling of this case was that neither WADA nor the Chinese gave any public notice upon learning of the positive tests for the banned heart medication Temozolomide, known as TMZ.
The athletes also were largely kept in the dark and the burden to prove their innocence was taken up by Chinese authorities, not the athletes themselves, which runs counter to what the rulebook demands.
Despite the criticisms, WADA generally welcomed the report.
“Above all, (Cottier) reiterated that WADA showed no bias towards China and that its decision not to appeal the cases was reasonable based on the evidence,” WADA director general Olivier Niggli said. “There are however certainly lessons to be learned by WADA and others from this situation.”
Tygart said “this report validates our concerns and only raises new questions that must be answered.”
Cottier expanded on doubts WADA’s own chief scientist, Olivier Rabin, had expressed over the Chinese contamination theory — snippets of which were introduced in the interim report. Rabin was wary of the idea that “a few micrograms” of TMZ found in the kitchen at the hotel where the swimmers stayed could be enough to cause the group contamination.
“Since he was not in a position to exclude the scenario of contamination with solid evidence, he saw no other solution than to accept it, even if he continued to have doubts about the reality of contamination as described by the Chinese authorities,” Cottier wrote.
Though recommendations for changes had been expected in the report, Cottier made none, instead referring to several comments he’d made earlier in the report.
Key among them were his misgivings that a case this big was largely handled in private — a breach of custom, if not the rules themselves — both while China was investigating and after the file had been forwarded to WADA. Not until the New York Times and German broadcaster ARD reported on the positives were any details revealed.
“At the very least, the extraordinary nature of the case (23 swimmers, including top-class athletes, 28 positive tests out of 60 for a banned substance of therapeutic origin, etc.), could have led to coordinated and concerted reflection within the Agency, culminating in a formal and clearly expressed decision to take no action,” the report said.
WADA’s executive committee established a working group to address two more of Cottier’s criticisms — the first involving what he said was essentially WADA’s sloppy recordkeeping and lack of formal protocol, especially in cases this complex; and the second a need to better flesh out rules for complex cases involving group contamination.
MANCHESTER, United Kingdom – Canada’s top male tennis players have defeated Finland 3-0 in the group stage of the Davis Cup Final.
Denis Shapovalov of Richmond Hill, Ont., beat Eero Vasa 7-6 (2), 6-2 in Tuesday’s first singles match. Montreal’s Felix Auger-Aliassime then dispatched Otto Virtanen 6-2, 6-3 in the second singles match.
With the tie already won thanks to the two singles victories, Shapovalov and Auger-Aliassime teamed up to best Virtanen and Harri Heliovaara 6-2, 7-5 in doubles play.
There was an element of revenge after Canada lost to Finland in last year’s quarterfinals.
“Everybody’s in good spirits, so it’s very good,” Auger-Aliassime said. “Any motivation is good, but I think it’s a different year, a different time, and (last year’s loss) was behind us. This year we have a full team and everybody’s playing better than last year. Everybody’s improved.”
It’s the second consecutive group-stage tie Canada has won after beating Argentina 2-1 on Tuesday. Canada, the lone seeded team in Group D, will face host Great Britain on Sunday.
Four groups of teams are playing in four cities this week to qualify for the eight-team Finals in Malaga, Spain, in November. The top two countries in each four-team group advance.
Since Canada’s undefeated after two opponents in the group stage, it is set to advance to the Davis Cup Finals.
“Couldn’t ask for more today, super proud of the team,” said captain Frank Dancevic. “Great team spirit, amazing bench team spirit, and fans pushing us through the day.”
It is Canada’s fifth consecutive appearance in the Davis Cup Finals, having won its only title in 2022. The Canadians defeated South Korea 3-1 in February’s Davis Cup qualifiers in Montreal to reach the group stage of the finals.
— With files from The Associated Press.
This report by The Canadian Press was first published Sept. 12, 2024.
