Proposed federal tax hike would make Canada’s top capital gains tax rate among the highest of 37 advanced countries

VANCOUVER—Ottawa’s proposed increase to the effective capital gains tax rate will result in Canada having among the highest—and least competitive—top capital gains tax rates in the industrialized world, finds a new study released today by the Fraser Institute, an independent, non-partisan, Canadian public policy think-tank.

“The evidence is clear—taxing capital gains deters investment, particularly smaller and start-up firms, which in turn slows productivity gains and innovation, all things Canada needs right now to raise living standards for workers,” said Jake Fuss, director of fiscal studies at the Fraser Institute and co-author of Canada’s Waning Competitiveness on Capital Gains Taxes.

The study finds that by increasing the inclusion rate, the federal government has made Canada less competitive compared to other advanced countries. At a 50 per cent inclusion rate, Canada’s top capital gains tax rate ranked between 17^th and 23^rd (depending on the province) out of 37 high-income developed countries in the Organisation for Economic Co-operation and Development (OECD).

Raising the inclusion rate to 66.7 per cent means Canada’s top capital gains tax rate would be among the highest and least competitive (between 8^th and 13^th highest, depending on the province).

The study notes that if Canada’s capital gains inclusion rate were lowered to 33.3 per cent, Canada would be among the most competitive in the OECD, ranking 30^th and 31^st, again, depending on the province.

“Instead of raising taxes on capital gains, policymakers should consider reducing taxes as a way of attracting much-needed investment, and reversing Canada’s current economic slump,” Fuss said.

Media Contact:
Jake Fuss, Director, Fiscal Studies, Fraser Institute
Grady Munro, Policy Analyst, Fraser Institute

To arrange media interviews or for more information, please contact:
Drue MacPherson, Fraser Institute
604-688-0221 ext. 721
drue.macpherson@fraserinstitute.org