Finance Committee on Jan. 26th, 2026

[Pierre Leblanc]

There are colleagues of ours who deal with the macroeconomic effects of fiscal measures that are taken into account, so—

[The Chair, Liberal, Karina Gould]

That concludes the five minutes for this round. Thank you, Mr. Strauss.

We're going to continue. Mr. MacDonald, you have five minutes.

[Kent MacDonald, Liberal, Cardigan, PE]

Good afternoon, Madam Chair.

Good afternoon, witnesses.

I want to start with a discussion of the lifetime capital gains exemption that's in budget 2025. I believe it's in parts 1 to 4, so we'll be good there.

I'm a representative from Atlantic Canada. The lifetime capital gains is an instrument that farmers, fishers and small businesses have used extensively to allow them to transition their businesses and have money for retirement. The increase from $1 million to $1.25 million that is in the budget.... Will that keep increasing over time? I read that it's going to be indexed in 2026. Do you know the index level? How will that increase over time?

[Pierre Leblanc]

You're right: Budget 2024 proposed—and you have this before you in Bill C-15—to increase the lifetime capital gains exemption limit. It would have been otherwise, in 2024, just over $1 million, so...to $1.25 million in 2024 and in 2025.

You also rightly mentioned that 2026 is the first year of indexation. We use the same indexation factor that we use for the rest of the tax system. It's based on the consumer price index, and for 2026 that's 2%. That's applied to the LCGE, just as it's applied to other tax parameters. The result is, now, that the LCGE in 2026 is $1.275 million, so it went up by $25,000. Basically, it'll continue to be indexed going forward, so next year and in future years by the same.... It will depend on the consumer price index and how that evolves, but it'll basically continue on that upward track, in accordance with CPI.

[Kent MacDonald, Liberal, Cardigan, PE]

Can you give any opinion on the level of capital gains exemption? Do you feel it's high enough for the industries that it's been applied to?

[Pierre Leblanc]

The purpose of the measure is to increase incentives for entrepreneurship. In some ways, there are links—more on the entrepreneurship side—to what my colleague, Mr. Baylor, was talking about: investment. It's always, with any level, a balancing act between encouraging certain types of activity and collecting a certain amount of revenue. What the government proposes here is that $1.275 million, in 2026, is an appropriate level.

The other thing I'd add is that it's per individual. You mentioned farming businesses in your riding; often, there can be two spouses who own, so that can be multiplied if they're both owners. In that case, you could have $2.55 million in 2026 in joint LCGE limits.

[Kent MacDonald, Liberal, Cardigan, PE]

That's a good point, because I just went through a succession plan with three brothers, and it's an exemption of several million dollars, so it does fit. It's welcome news, in the budget, for Canadians who worked hard all their lives and want to get something out of their business.

Now, further along that vein of questioning, we've also extended the capital gains exemption for employee ownership trusts to include worker co-operatives. In Atlantic Canada, we have a lot of that in the agricultural community. Can you elaborate on how the employee ownership trust works—just the schematics of it, maybe a little about who is and is not eligible—now that it will also cover the workers' co-operatives?

[The Chair, Liberal, Karina Gould]

Be very brief. We have 20 seconds left.

[Pierre Leblanc]

The main idea with an employee ownership trust is that there would be an incentive extended to worker co-ops. This is up to $10 million tax-free on the capital gains realized when you sell a business that, in the case of an employee ownership trust, is going to be owned for the benefit of employees.

[The Chair, Liberal, Karina Gould]

I apologize, Mr. Leblanc. I have to cut you off. Thank you very much.

Thank you, Mr. MacDonald.

Mr. Garon, you have the floor for two and a half minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Madam Chair.

I'll continue along the same lines.

Our media sector is in crisis. Whether it's television, radio or local newspapers, we're seeing media shut down. By axing the digital services tax, which was going to give them a royalty to compensate for the content the major platforms often steal from them, we're pulling the rug out from under them and taking away their means of survival.

As I understand it, only the Bloc Québécois here in Parliament is defending these media. The day after the cuts to TVA, the member for Montmorency—Charlevoix criticized the Bloc Québécois in the House of Commons for wanting to help these businesses.

I understand that the government is scrapping the digital services tax and the royalty that comes with it. I'd like to know if there's anything in the budget specifically to help the media, which will be paying directly for eliminating the digital services tax.

[Ingrid De Freitas]

Thank you for the question.

To clarify, the digital services tax is a tax, so the revenue from that would go into the consolidated revenue fund. It would not have been earmarked to give to certain media companies.

There are other digital measures that are not taxes—I'm not here to talk about those—but sometimes there's confusion between these different measures. This is to clarify that the digital services tax is just a tax—

[Jean-Denis Garon, Bloc, Mirabel, QC]

I'll rephrase my question.

Is there anything in this budget to help our media in the context of the crisis they're currently experiencing? Is there even a single measure or line on that?

[Ingrid De Freitas]

I am here for the DST. If any of my colleagues are aware of other.... I think all of us here are from the tax policy branch right now.

[Jean-Denis Garon, Bloc, Mirabel, QC]

We have an army of officials here. Can someone tell me if there's even a single measure to address this?

[Pierre Leblanc]

Perhaps we can ask our colleagues from the department and then provide you with an answer.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Yes, please.

I have one last question.

The underused housing tax violated provincial jurisdiction and encroached on the scope of the property tax.

Is this like the luxury tax on planes, where the government just realized that it wasn't working, that it couldn't be implemented and that the government was wasting money administering the tax? Why was that tax scrapped?

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Garon. Your two and a half minutes are up.

Mr. Lefebvre, you have the floor for five minutes.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Thank you very much, Madam Chair.

Thank you to our guests here today.

Can the officials concerned tell me how much it cost to prepare to introduce the digital services tax, which was ultimately scrapped?

[Ingrid De Freitas]

Thank you for the question.

I don't have information available on a breakdown of how much it cost to put this together. When we work on files, oftentimes we have a lot of the same people working on multiple files at once, so that kind of data may not be available. Even when systems are built, sometimes the system will be administering more than one tax at the same time. Different components of both the finance department and the CRA do different functions, so I think that kind of number would be challenging to come up with.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Can you confirm that no money has been collected under the digital services tax?

[Ingrid De Freitas]

In the bill, you'll see there is a provision for the refund of the funds remitted to the CRA. The announcement regarding the rescindment of the digital services tax came the day before the first payments were due, so some payments were made. If this were to pass, those amounts would be refunded.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

So, if the amounts collected are reimbursed, the net revenue for the country will be nil. Is that correct?

[Ingrid De Freitas]

That's correct.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Earlier, you said that, for 2023-24, $2.3 billion in revenue won't be collected. We're talking about $900 million for subsequent years. The Minister of Finance and National Revenue, the Hon. François‑Philippe Champagne, announced that this tax will be eliminated in anticipation of a trade agreement with the United States. In fact, we had expected to reach an agreement with the United States before July 21, 2025. We're losing $2.3 billion for 2023-24 and $900 million for subsequent years, and we're getting nothing in return. We gave something up with nothing guaranteed in return during negotiations. Negotiations never resumed. They're at a standstill.

How can the Department of Finance make up for these losses?