CFIB criticizes lack of amendments to capital gains tax changes

CFIB criticizes the government's lack of amendments to proposed capital gains tax changes, citing concerns for small business owners

CFIB criticizes lack of amendments to capital gains tax changes

In a letter to the Finance Minister Chrystia Freeland, the Canadian Federation of Independent Business (CFIB) expressed disappointment that the federal government did not amend its proposed changes to capital gains taxation.

The associated rhetoric from the government reinforce that the proposed capital gains changes are about politics, not tax fairness. Business owners worry about the impact the new 66.7 percent inclusion rate will have on their ability to retire or save for a rainy day.

The government has claimed the rate change would only affect a tiny percentage of the wealthiest Canadians, but more than half (55 percent) of small business owners believe it will affect the eventual sale of their business.

Additionally, 45 percent say it will affect the investments they hold privately, and 41 percent say it will affect investments in their incorporated businesses.

The government has also given small business owners virtually no time to consider the changes before they come into effect in two weeks (June 25). This is deeply disrespectful to Canada's entrepreneurs.

A majority of business owners (59 percent) believe the increase of the Lifetime Capital Gains Exemption (LCGE) to $1.25m will be helpful to them.

Furthermore, 77 percent support the concept of the new Canadian Entrepreneurs’ Incentive (CEI), but only 45 percent believe they will directly benefit from it in its current form.

The government should strengthen both measures and ensure all businesses, regardless of their industry, can benefit from the new CEI.

Nearly two-thirds (63 percent) of small firms oppose the package of changes if critical amendments are not made. CFIB will continue to push for the following:

Expand the new Canadian Entrepreneurs’ Incentive to include all entrepreneurs:

  • Include all sectors, including farmers and fishers selling assets
  • Include non-founders to encourage people to invest in small firms
  • Cut the 10-year implementation schedule in half

Scrap the planned increase in the general inclusion rate to 66.7 percent. If the government is unwilling to abandon this plan, it should:

  • Grandfather all existing capital gains using a V-Day (valuation day) as was done in 1971
  • Allow corporations to benefit from $250,000 each year at 50 percent inclusion like individuals
  • Allow for 5-year income averaging to benefit from the $250,000 annual threshold for larger capital gains for irregular events, like selling a property

The letter was signed by Dan Kelly, president and Corinne Pohlmann executive vice-president, Advocacy.