Prime Minister Carney cancels controversial capital gains tax hike | Daily Hive

BalkansCat/Shutterstock

The start of the Government of Canada’s planned federal capital gains tax hike will no longer be deferred, as it will now be completely cancelled.

This was announced by Prime Minister Mark Carney today, citing economic stability and investor confidence as key factors in this decision.

“Canada is a country of builders. 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, creating more higher paying jobs,” said Carney today, just ahead of this weekend’s expected snap federal election call.

“It’s time to build one Canadian economy — the strongest economy in the G7.”

You might also like:

However, the increase will be maintained for the Lifetime Capital Gains Exemption limit to $1.25 million on the sale of small business shares and farming and fishing property.

The government previously led by Justin Trudeau first announced in April 2024 that individuals or corporations with annual capital gains over $250,000 would have two-thirds of those gains taxed. This would be up from the previous tax of half of the gains, which will now be retained under Carney’s leadership.

After the hike was announced in 2024, it sparked immense controversy due to its potential economic impact on investors, businesses, and the broader economy.

Critics argued that increasing the tax on capital gains would discourage investment, harm small business owners, and negatively affect retirement savings for Canadians who rely on investments.

Many also viewed it as a disincentive for entrepreneurship and innovation, as higher taxes on asset sales could discourage business expansion and risk-taking.

Supporters, however, claimed the increase was necessary to ensure wealthier individuals paid their fair share and to generate revenue for public services. The debate intensified amid concerns over Canada’s economic competitiveness, with some warning that higher capital gains taxes could drive investment out of the country.

The federal government had also indicated that the tax hike would generate $19.4 billion in additional revenue over five years, which would go toward building approximately four million new homes.

While the tax hike would have created new revenues for government-supported housing, critics questioned whether the tax increase would truly translate into more housing or if it would instead discourage investment in real estate development, potentially worsening the housing affordability crisis.

By January 2025, the federal government capitulated to the criticism, pressure, and the growing economic headwinds by the signs of the emerging Canada-U.S. trade war, and initially announced it would delay the start of the capital gains tax increase to January 1, 2026. The cancellation of the increase now marks a complete reversal of the policy.

“Prime Minister Carney announced that the Government of Canada will cancel the proposed hike in the capital gains inclusion rate. Cancelling the increase of the capital gains inclusion rate is a recognition of the vital role that builders and small businesses play in shaping Canada’s future. It will strengthen Canada’s ability to catalyze the enormous private investment needed to create jobs and opportunities and to build a stronger future,” reads a news release by the Prime Minister’s Office today.

“The new government is focused on catalyzing investment, incentivizing builders for taking risks, and rewarding them when they succeed. It is time to build.”

Carney’s move to axe the capital gains tax increase comes just a day after he announced that the 5 per cent GST applied to the sale of new or substantially renovated homes up to $1 million for first-time buyers would be eliminated.

Conservative party leader Pierre Poilievre also previously announced that if elected, he would cancel the capital gains tax hike and introduce a similar reduction to the GST on home sales.

You might also like: