Quantitatively, it is difficult to determine the exact effect, because we do not yet have all the measure’s details. We will have them this fall. However, there are a number of things we can say already.
For example, the Canadian Entrepreneurs’ Incentive—which was set up to compensate somewhat for the effects of the increase—doesn’t apply to the arts and entertainment, recreation, hospitality or restaurant industries. I don’t think business owners in these types of industries are part of Canada’s wealthiest 1%. The same goes for those employed by those businesses. I say it very respectfully, but so much for fairness!
That said, coming back to a certain number of points raised about investments made by businesses, they do invest capital, especially to save for harder times, expansions or acquisitions.
The increase will therefore make businesses’ investment decisions more difficult. The acquisition of high value-added assets with potential for appreciation, such as intellectual property, even land or property, aren’t always passive or speculative investments. Economic studies are clear on the matter. Increasing the capital gains inclusion rate will negatively impact the mergers and acquisitions market that we need to increase the size of our businesses.
In Canada, we are lagging in this area compared to our competitors. Our businesses are generally a little smaller, which has an impact on their productivity rates.