Ottawa: The Parliamentary budget officer (PBO) estimates a $17.4 billion increase in income tax revenue from 2024-25 to 2028-29 due to the Liberal government’s higher capital gains tax. This new tax, effective from June 25, increases the tax rate on capital gains over $250,000 from 50% to 66.67%.
The PBO’s estimate is lower than the government’s projection of $19 billion. The PBO also suggests that revenue could be as low as $15.6 billion due to the volatility of capital gains and other factors.
The tax change will apply to all capital gains earned by individuals, trusts, and corporations, but gains from selling a primary residence remain tax-free.
The PBO based its projections on historical tax data and adjusted for expected taxpayer reactions, such as selling assets before the new rate took effect. They noted that capital gains can be unpredictable due to market conditions and other factors.
Business groups have expressed concerns about the tax potentially affecting economic growth, but the government believes it will create fairness.