The Canadian Federation of Independent Business is urging Parliament to rein in the Canada Revenue Agency’s practice of collecting taxes, interest, and penalties on capital gains amendments that were never approved by lawmakers.
“This experience highlights the need for Canada to introduce rules guiding provisional authority for the agency to collect taxes,” said Dan Kelly, CEO of the federation.
“The federation will be lobbying the next federal government to put in place legislation similar to the United Kingdom which allows its tax authority no more than six months to pass legislation and makes clear that prorogation in Parliament automatically returns tax rates to their previous levels if legislation was not passed.”
Blacklock's Reporter said the CRA promised “corrective assessments” to refund amounts levied under a $17.4 billion hike in the capital gains tax enacted without parliamentary authority.
“The agency will grant relief in respect of late filing penalties and arrears interest,” it stated. “Now that the government has communicated its intentions regarding the proposed capital gains inclusion rate, we are working as quickly as we can to adjust our systems and forms.”
The agency based its original order on cabinet’s stated intention to tax 66% of capital gains retroactive to last June 25. In response, Finance Minister Dominic LeBlanc issued a news release postponing the capital gains changes until January 1, 2026, after the next election.
“The deferral of the increase to the capital gains inclusion rate will provide certainty to Canadians,” LeBlanc said. “Given the current context our government felt it was the responsible thing to do.”
The CRA defended its actions by citing a longstanding policy where cabinet tax bills proposed — but not yet passed — are enforced as if they were inevitable.
“Governments will from time to time implement proposed legislative changes respecting taxation, for example for new capital gain inclusion rates or new GST rates, before their formal legislative enactment,” explained then-Parliamentary Law Clerk Philippe Dufresne at a 2021 Commons finance committee hearing.
“The actions of taxpayers will then be influenced by the proposed measures that are oftentimes already implemented administratively by the Canada Revenue Agency.”
He further testified, “Taxes are collected as of the date of this notice even though it may be months if not years before the implementing legislation is actually passed by Parliament. Implementation of the tax measures often starts when their announcement is made.”