Capital Gains Tax Cut Back On Canada's Agenda

by Mike Godfrey, Tax-News.com, Washington

01 November 2006

Canada's Conservative Minister of Finance Jim Flaherty has said that the government is moving forward with its attempt to cut capital gains tax after postponing the measure for further consultation earlier in the year.

Flaherty told reporters that the department is "looking at a series of possibilities" with respect to capital gains which could be tabled as part of the 2007 Budget.

The Conservatives initially proposed to eliminate capital gains tax on all profits that were reinvested within six months. However, the idea quickly ran into opposition, not least from within the Finance Department itself, which baulked at the potential cost in terms of foregone tax revenues.

The proposal was put onto the backburner in March after Flaherty conceded that the government will find it "challenging" to accomplish in the short term.

Nonetheless, Flaherty said that the government will persist with the policy, arguing that it would help to free up "trapped" capital and encourage more investment throughout the economy.

"Canadians who invest, or inherit cottages or family heirlooms, should be able to sell those assets and plow their profits back into the economy without taking a tax hit," he stated.

Flaherty added that the government plans to release a 'fiscal update' later this month. This is unlikely to contain any specific proposals regarding taxation, and will instead likely focus on the government's broader fiscal and economic objectives.

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