Ottawa failed to stop a Federal Court motion last week that could prevent non-legislated tax hikes, according to the Canadian Taxpayers Federation. The group filed its application several months ago to oppose taxation on capital gains.

“This decision is a big win for taxpayers, and we’re going to keep fighting to make sure unelected bureaucrats can’t impose unapproved tax hikes,” stated Devin Drover, CTF General Counsel. 

The inclusion rate was to increase from 50% to 67% on capital gains over $250,000 for individuals, and on all gains for corporations and trusts, before its timely cancellation on March 21.

Mark Carney pledges to run a government that is “focused on outcomes, not spending.”

Carney vows to reverse the capital gains tax hike, reduce red tape, and increase competitiveness. pic.twitter.com/VG7zTleYOD

— Juno News (@junonewscom) February 5, 2025

The Court dismissed the federal government's arguments on August 12, ruling that the case challenges the CRA's implementation of an unlegislated tax change, not a future tax assessment appeal.

“This case is about a basic constitutional principle: No taxation without representation,” Drover said. “Unelected bureaucrats shouldn’t be able to raise taxes without a vote in Parliament.”

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The CRA can enforce tax hikes before a cabinet bill receives Royal Assent, but only if the relevant legislation eventually passes. According to Blacklock’s, the agency began charging interest on unpaid taxes starting March 3, even though the bill had not passed.

“If the CRA can get away with this once, it can do it again, and that’s why we’re pressing forward in this case," explained Drover. The legal challenge will now proceed to a full hearing. 

"We cannot afford economically destructive Liberal taxes that will drive even more business and jobs out of our country," says Pierre Poilievre as he vows Conservatives will scrap the Liberals' capital gains tax. pic.twitter.com/7K8gTTYqOc

— Rebel News (@RebelNewsOnline) January 16, 2025

The CTF represents Debbie Vorsteveld of Mapleton, Ontario, who is challenging the never-passed legislation. 

Business groups, the Canadian Medical Association, and the Taxpayers Federation opposed the increase due to concerns about competitiveness, innovation, and talent retention.

Conservative Leader Pierre Poilievre also called the proposal a "job-killing tax hike," citing a CD Howe Institute report predicting significant economic contraction. 

The Conservatives vowed to scrap the capital gains hike, which Prime Minister Mark Carney later cancelled before calling a snap election.

The Liberal government, however, will keep the $1.25 million lifetime capital gains exemption for small business shares, farming, and fishing property, with legislation expected in the future.

The prorogation of Parliament rendered any bill useless pending a majority vote. “Taxpayers are demanding the Canada Revenue Agency immediately halt enforcement for the proposed tax increase,” reads a prior CTF statement to no avail. 

Chrystia Freeland attempts to defend her capital gains tax hike and warns high earners of "the wrath of the vast majority of their less privileged compatriots." https://t.co/vD78U4ZuZQ pic.twitter.com/g7Q9rObIqb

— Rebel News (@RebelNewsOnline) June 10, 2024

According to the Department of Finance, parliamentary convention dictates that tax proposals are effective once a notice of ways and means motion is tabled, ensuring consistency and fairness. 

Former finance minister Chrystia Freeland praised this measure for promoting “tax fairness,” though focus groups disagreed, fearing auditors would target middle and lower-income individuals. 

Most Canadians rejected the proposed hike to pay down federal debts. Leger polling commissioned by the Taxpayers Federation shows 54% of taxpayers hold this viewpoint.

Asked if they preferred increasing capital gains taxes or reducing spending to curb the deficit, under a quarter (23%) of Canadians favoured raising taxes.