TLDR:
– Raising the capital gains inclusion rate will deter venture capital investment and entrepreneurship in Canada.
– The federal and Quebec governments plan to increase the capital gains inclusion rate, which will affect capital gains realized after June 25th.
The Montreal Economic Institute released a study stating that the increase in the capital gains inclusion rate will negatively impact investment and entrepreneurship in Canada. The federal government plans to raise the rate from 50.0 per cent to 66.7 per cent, affecting capital gains over $250,000 for individuals and all gains for corporations and trusts. The Quebec government under Premier François Legault also announced a similar increase. The study explains that higher taxes reduce the availability of venture capital by lowering projected returns while keeping risks high. This leads to a decrease in investment and entrepreneurship as investors are less likely to invest with reduced rewards. Studies show that increased capital gains taxes lead to decreased investment and innovation in start-ups, ultimately hindering economic growth. The full MEI study can be found here.
For more information or interview requests, contact Renaud Brossard, Vice President of Communications at rbrossard@iedm.org.
