Large groups of Canadian companies and business people no longer support the idea that “one in five Canadians would be directly affected” by the capital gains tax changes announced by the federal government.

In an open letter to federal Finance Minister Chrystia Freeland, the Canadian Chamber of Commerce and several other major national organizations added that “the impact of this tax increase would be borne directly or indirectly by all Canadians.”

“In fact, one in five Canadians will be directly affected over the next ten years,” the original letter states.

However, the study from which this figure came did not come to the same conclusions at all.

The study, conducted in 2023 by Professor Jonathan Kesselman of Simon Fraser University, estimates that one in five Canadians would be affected over a 10-year period if, however, the inclusion rate for all income in capital were increased.

However, the latest federal budget only increases the inclusion rate for capital gains over $250,000, meaning a much smaller portion of Canadians would end up paying higher taxes – rather than “one in five Canadians.”

The new tax rate would also apply to all capital gains realized by corporations.

When the Canadian Press asked about this figure, the Chamber of Commerce posted the letter to Minister Freeland on its website. We now read that “one in five Canadian businesses is at risk of being directly affected within ten years.”

“We have looked into the matter and upon review, the wording could be clearer to reflect the impact on Canadian businesses. We have updated the copy of the letter online,” spokesman Karl Oczkowski said in an email.

In addition, the Canadian Chamber of Commerce did not immediately explain how it reached the new conclusion that “one in five Canadian businesses is likely to be directly affected by the tax within ten years.”

“Misleading” claim from Ottawa

The letter to Minister Freeland was signed by the Canadian Chamber of Commerce, Canadian Manufacturers and Exporters, Canadian Federation of Independent Business, Canadian Venture Capital and Private Equity Association, Canadian Association of Franchise and Canadian Canola Growers Association.

These organizations are calling on the Liberal government to abandon this tax measure because it will ultimately harm the economy by reducing competition and innovation. They still consider Ottawa’s claim that “only the wealthiest Canadians” would be affected by this measure to be “misleading.”

Professor Kesselman, who taught at the Simon Fraser School of Public Policy in British Columbia, died earlier this year.

The federal budget presented last month proposes making capital gains – profits from the sale of assets – taxable at two-thirds instead of half. The increase in this so-called “inclusion rate” would apply to capital gains over $250,000 for individuals as well as all capital gains by companies.

The federal government estimates that in a given year, 0.13% of Canadians would pay higher taxes on their capital gains. In addition, the government says only a small portion of businesses will be affected, pointing out in the budget that 12.6% of businesses made capital gains in 2022.

Prime Minister Justin Trudeau’s government faced backlash from several groups over the tax changes, including the Canadian Medical Association.

The association stressed that doctors with their own practices were particularly affected because all their investments were made within a corporation.

But Minister Freeland and Prime Minister Trudeau rejected this reluctance, saying it was high time for the richest Canadians to pay their fair share of taxes.

They also argued that the government needs these tax revenues to fund programs such as housing and health care and to ensure “generational equity” for young Canadians.

The Liberal government estimates that the higher inclusion rate will generate $19.4 billion in tax revenue over the next five years.

Three days after the federal budget was presented, the Quebec government announced that it would adjust its tax system to bring it into line with five measures proposed in Ottawa, including this rate on the inclusion of capital gains.