Photo: Jacques Boissinot The Canadian Press Quebec Finance Minister Eric Girard estimated Wednesday that harmonization of capital gains taxation could bring $3 billion to Quebec over five years.
Marie-Michèle Sioui and Sandrine Vieira in Quebec and Ottawa
Published on April 17
- Canada
Quebec Finance Minister Eric Girard will decide by the end of the week whether Quebec will also increase the tax on capital gains, as Ottawa will do starting at the end of June . Mr. Girard estimated Wednesday that such harmonization could bring $3 billion to Quebec over five years.
“Historically, Quebec has always been harmonized in terms of capital gains rules — always — and this is for reasons of cohesion between the Quebec and federal tax systems,” he explained. He committed to announcing Quebec's intentions “by the end of the week.”
Mr. Girard recalled that all provinces “will harmonize automatically” in Ottawa, with the exception of Alberta for corporate taxes. “You know, it’s a revenue increase, it’s a tax increase. We want to see what it is, the extent of the measure, what it will give us, confirm all that,” added the man who signed his most recent budget in red ink.< /p>
In her budget tabled Tuesday, Federal Finance Minister Chrystia Freeland proposes an increase in capital gains tax starting June 25. For individuals making a gain of more than $250,000, the tax would apply to two-thirds of the value of the gain, rather than half. The inclusion rate would also increase from half to two-thirds for companies and trusts, without a minimum level however.
In the press scrum, Mr. Girard said he feared that Ottawa was overestimating the gains that the increase proposed by Ms. Freeland could bring. “We were surprised, the federal government seems to be making more money than we thought. There are fewer in Quebec, we want to check the calculations,” he said. Ottawa calculates that increasing the capital gains tax could bring in $19.3 billion over five years.
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The chief economist and strategist for the Desjardins Movement, Jimmy Jean, expressed a similar fear, saying he believed the federal budget “is based on a lot of hope.” “In fact, we are targeting taxpayers who, as we know, are very tax sophisticated. And this wealth can be moved very quickly, very quickly,” he told Devoir.
Not the main residences
The day after the federal budget, Prime Minister Justin Trudeau made this measure the central point of his speech to the members of his caucus.
“We don't think it's fair that a teacher or electrician pays taxes on 100% of their income, while a multi-millionaire only pays taxes on 50% of passive income that it generates through capital gains. So, we’re going to make them pay a little more,” the prime minister said to a round of applause.
This tax will not apply to income from sales of principal residences, Mr. Trudeau promised. “Those who will be affected by this measure are those who have benefited from an economy that appears to be tilted in their favor, to the detriment of others, particularly young people. » According to Ottawa projections, the increase in capital gains taxation affects approximately 40,000 people, or 0.13% of the population.
Back in Quebec, Minister Girard described the Freeland budget as “spending.” “I am referring to the spending growth rate, in 2024-2025, of 6.5%. This could have the effect, if it does not delay the start of the Bank of Canada's rate cuts, of reducing the extent of the rate cuts,” he worried. “So this fiscal stimulus, this level of significant spending in 2024-2025, is an inconsistency, an error in terms of the harmonization between fiscal policy and monetary policy. I think it’s a spendthrift budget,” he observed.
Jimmy Jean, for his part, believes that if the increase in public spending adds economic activity – and therefore inflation – it does not necessarily indicate a return to a period of overheating. The announced drop in admissions of non-permanent residents will be disinflationary, given the negative impact on growth, he indicates.
Fields of expertise
The reaction to Minister Girard's budget surprised the federal Minister of Tourism, Soraya Martinez Ferrada, MP for Hochelaga. “I still find it incredible that the provinces criticize us for spending too much,” she said Wednesday morning.
Asked about investments in areas falling under Quebec's jurisdiction, in particular billions for a school feeding program and for the construction of new housing, the minister believes that it is a shared responsibility. “We all have to do our part. We are taking a good step forward and we are asking the provinces to do the same thing,” she argued.
Several measures from Tuesday's federal budget — the implementation of a housing plan, among others — have been denounced by the provinces, who consider them to be interference in their areas of jurisdiction.
“Attrition” in all ministries
Approximately 5,000 federal civil servant positions should be abolished over the next four years to save Ottawa several billion dollars.
In its budget, the Trudeau government specified that it will rely on “natural attrition” — positions will therefore not be filled after retirements or resignations. On Wednesday, the President of the Treasury Board, Anita Anand, affirmed that the entire government apparatus will be affected by this instruction. “Everyone is going to examine [their numbers] of civil servants. It will not just be the largest departments, it is an initiative with all ministries. »
Le Devoir had already reported that ministries were planning to act in this way. Ottawa intends to save $15.8 billion over five years, and $4.8 billion per year thereafter.