The proposed increase to the capital gains inclusion rate by the federal government has created a "nightmarish scenario for taxpayers", according to a report co-authored by Torys partner John Tobin and Carl Irvine for the C.D. Howe Institute.
The report, "A Kafkaesque Tax Quagmire: Why We Need to Defer or Abandon the Failed Capital Gains Changes", has been referenced by The Globe and Mail, BNN Bloomberg, Advisor.ca, Investment Executiveand Western Standards News.
Since June 2024, the Canada Revenue Agency has been administering the rate changes, even though the government failed to enact the proposal into legislation prior to Parliament being prorogued, the report says.
"With the likelihood of a spring election, taxpayers face a choice: pay at the higher rate now and struggle to recoup overpayments if the measure dies, or follow existing law and risk interest and penalties should it eventually pass," the authors say. "This administrative limbo erodes public confidence in the tax system, as taxpayers and tax preparers struggle with a rule that might never be legally enacted."
The report proposes that the government abandon, or at least delay, the proposed increase to avoid having taxpayers filing 2024 returns under rules that may not pass into legislation.
"Canadians deserve a predictable tax system, not one that forces them to hedge bets on unpassed legislation," the authors say.