The increased capital-gains inclusion rate will negatively affect Canadian businesses.


Ryan Beedie, (CONTRIBUTED TO THE GLOBE AND MAIL) — Ryan Beedie is the president of Beedie, and a dedicated philanthropist. He is a member of the Order of British Columbia and in 2023 was named Business Leader of the Year by the Canadian Chamber of Commerce.

When the Liberal government announced its intention to increase the capital-gains inclusion rate to 67 per cent from 50 per cent, it created a flurry of commentary – much of it theoretical – about how it might affect different corners of the economy.

As the owner of a large Canadian business, I would like to illustrate how this change will directly and immediately affect the allocation of capital for our company, and companies like ours – which will, in turn, negatively affect investment and philanthropy.

Almost all of our company’s cash flow is directed one of two ways. First, it is invested in industrial real estate development and multifamily residential projects, which provide housing to thousands of Canadians. We also invest in innovative and growing Canada-based businesses that employ thousands more.

Second, we invest millions of dollars into philanthropic initiatives, among them scholarship programs, hospital expansions, food banks, below-market housing and other causes. A higher inclusion rate on capital gains will reduce our company’s ability to invest in these ways.

What’s more, by reducing the after-tax return on potential investments, the hurdle for new opportunities becomes that much higher, and renders many potential investments economically unviable.

The government has claimed that very few people will be affected by this change, but this could not be further from the truth. When our company isn’t able to invest as much, then industry, housing and employment all take a hit.

For example, in assessing what this change means to our decision making, I have considered a B.C. mining project in which we are the lead investor. The mine construction is employing more than 500 people, and when operational, there will be continuing employment for 400 people, which will have a significant impact on local communities. Our commitment to the project was based on the current capital-gains inclusion rate, which recognizes the inherent financial risks; increasing that inclusion rate midway through the project is akin to moving the goalposts. And as the inclusion rate goes up, the desire and appetite for a project like this – and the risk that comes with it – wanes correspondingly.

Moreover, the notion that the inclusion rate increase is based on “equity” or “fairness” is flawed, as this change was not paired with any reduction in tax for a financially stressed middle class. It will also negatively affect low- and middle-income earners because less investment leads to reduced employment and productivity; meanwhile, non-profits that support society’s most vulnerable will receive even less at a time when they’re already struggling with increased costs and higher demand.

The government’s statement that just 0.13 per cent of Canadians are affected reflects an inaccurate measure of efficacy, as the number of people directly affected by a tax is not a fair measure of whether it’s good policy. Instead, the measure should be whether or not the change makes for a healthier economy and improves the lives of Canadians.

It is also a misleading figure, because all companies are subject to the higher inclusion rate on every dollar of capital gains. In 2022, more than 300,000 businesses had net capital-gains income, and so the actual number of Canadians affected is far greater than the government claims to be the case.

The proposed change is another example of a rapidly expanding government sector – which is hardly a bastion of productivity and growth – while the private and not-for-profit sectors are shrinking in relative terms as a proportion of the economy. At a time when Canada is struggling with productivity, as well as the corresponding anemic per-capita economic growth and declining level of living standards, this is poor economic policy.

We will continue to invest in our country and community, but will be forced to do less of it.


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