The prorogation of Parliament has caused uncertainty over controversial capital gains tax changes and other key tax legislation, resulting in confusion for tax filers, according to the Chartered Professional Accountants of Canada.
While it is unlikely the capital gains changes will become law before the April 30 tax filing deadline, the Canada Revenue Agency will likely proceed with administering the proposed legislation unless Parliament issues a formal statement to the contrary, CPA Canada said in a press release.
While convention suggests future governments will honour announced tax changes to prevent marketplace confusion, the current situation remains unclear.
John Oakey, CPA Canada’s vice-president of taxation says the situation leaves taxpayers in limbo.
“Although the CRA is updating forms and systems for the proposed capital gains changes, taxpayers are ultimately responsible for deciding whether to file based on current or proposed law. The CRA cannot enforce filing under proposed legislation. However, if the changes, effective June 25, 2024, are later passed, taxpayers who file based on current law may face arrears interest,” says Oakley
“Businesses, particularly corporations and trusts, should be aware of potential filing delays and the CRA’s interest and penalty relief for returns due on or before March 3. They should also closely monitor the evolving situation, as legislative changes could impact financial planning and tax strategies. It is essential for all tax filers to stay informed of any new developments from the CRA and Parliament to avoid confusion and ensure compliance," Oakley ads.
Uncertainty over the future of capital gains changes, a projected source of revenue in the 2024 Federal Budget, further complicates the country’s fiscal situation, says CPA Canada’s chief economist David-Alexandre Brassard.
“Even while relying on the capital gains changes to the tune of $7 billion in 2023-2024 and $3 billion per year afterwards, the federal government was missing many of its fiscal anchors,” says Brassard. “This uncertainty surely adds fiscals risks to the federal budget.”