Taxation… before… representation?

I have been reading a lot about the CRA beginning to collect the new Capital Gains Tax measures here in Canada. Including the fact that it has not received final parliamentary consent yet. For those who are wondering about the changes proposed last year, here is what you should know!

The new capital gains tax is in reference to capital gains in excess of $250,000. This is on a cumulative basis. For specifics to your situation, please contact us. The Canada Revenue Agency (CRA) can collect the new capital gains tax despite it not being formally passed in Parliament due to a practice rooted in parliamentary convention and administrative procedures. This is not unusual for Canada. There have been other occasions where the CRA has adopted the new rules prior to the final approval. Here's how this situation unfolds:

• Parliamentary Convention: According to the cited reports, the CRA follows a tradition where taxation proposals are considered effective as soon as the government tables a Notice of Ways and Means Motion. This convention allows tax changes to be administered even if they have not been fully legislated. The Finance Department and the CRA have stated that "parliamentary convention dictates that taxation proposals are effective as soon as the government tables a Notice of Ways and Means Motion; this approach provides consistency and fairness in the treatment of all taxpayers."

• Administrative Practice: The CRA has historically administered tax changes based on proposed legislation to maintain consistency and avoid disruptions in tax collection processes. Even though the capital gains tax increase hasn't received royal assent, the CRA has announced its intention to continue collecting taxes based on the new rates, which were proposed in the 2024 federal budget. This practice was confirmed by statements from the CRA indicating they would proceed with the higher capital gains inclusion rate of 66.7% for gains realized on or after June 25, 2024.

• Pending Legislation: The changes were proposed in the budget and introduced via a Ways and Means Motion in September. Although formal legislation has not been passed due to political turmoil including prorogation of Parliament, the CRA has stated they will issue forms and administer the tax based on these proposals until such time as Parliament either confirms or rejects the changes. If Parliament resumes and signals no intent to proceed with the measures, the CRA would then cease administration of these new rules.

In essence, the CRA's actions are based on the expectation that these tax changes will be legislated and the need for administrative continuity in tax collection, even if the final legislative approval is pending. This reflects a balance between adhering to current parliamentary practices and ensuring tax compliance amidst legislative delays. Until further notice, it is likely we will treat all situations as if the proposed changes are enacted. Should the situation change, we will then change our course. Our goal is to continuously monitor all taxation changes that may affect our clients.

Should you have further concerns, please email us regarding your situation.

Alexander

The information contained in this document has been prepared by Alexander Philipp a registered investment advisor attached to PEAK Securities Inc. The information has been obtained from sources considered reliable and relevant. The information in this document is general in nature and may not be complete in regards to your personal situation. This document does not constitute investment advice. The opinions expressed above do not necessarily reflect those of PEAK Securities Inc. Peak Securities is not liable for the content of this document.