While the news cycle in 2025 has largely been focused (rightfully) on the Liberal leadership race and the inauguration of President Donald Trump, there is another issue that still warrants significant discussion: the detrimental impact of the proposed changes to the capital gains inclusion rate.
The prorogation of Parliament meant any legislation in front of the House of Commons or the Senate was, for lack of a better term, dead. This included legislation that outlined changes to the capital gains inclusion rate, which were highlighted in the federal budget in 2024. Yet despite not receiving Royal Assent, the Canada Revenue Agency (CRA) is proceeding with collections under the new inclusion rate.
Several business associations across Canada, including the Canadian Construction Association (CCA), have spoken out about this implementation and called for a reversal. And while there is parliamentary precedent for the CRA to continue in its collections under the new rate, it remains a divisive issue that warrants proper debate at the federal level.
The Mechanical Contractors Association of Canada (MCAC), like many others, declared its opposition to the policy when it was announced in the 2024 federal budget.
“As a trade contractor association, MCAC is concerned with any taxation policy that would negatively impact its members, as well as the potential to attract new individuals and investment to the mechanical contracting industry,” the association stated at the time. “The Canadian economy is faced with many challenges in the years ahead that will require a strong and robust mechanical contracting sector. It is as important as ever to ensure a business environment exists that allows mechanical contractors to thrive so that we can continue to build the Canada of tomorrow.”
The changes, which the Liberal government highlighted to achieve generational fairness and equity, were regarded by many as a threat to small businesses across Canada, including in the construction industry. Ultimately the proposed changes would place an unfair tax burden on those firms.
The construction sector in Canada, for the large part it plays in the Canadian economy, is predominantly made up of small- and medium- sized enterprises (SMEs). These SMEs not only construct the buildings and critical infrastructure that power our economy, but contribute to their local communities by creating jobs, supporting community development, and driving economic growth at the local and regional levels.
With the changes to the capital gains inclusion rate, small companies, many of which are independently owned and operated, will be punished unfairly on the gains realized in the sale of their assets or businesses. Instead of allowing for re-investment in new equipment or innovation, ultimately these businesses will be faced with an increased tax liability.
At the same time, as construction continues to face challenges with respect to labour productivity, these changes also risk future investments in the sector; investments that are critical to addressing the capacity challenges our industry faces in the years ahead.
Last week the leader of the Conservative Party Pierre Poilievre announced his intent to reverse the implementation of these rate increases should the Conservatives form government, adding that the party has also written a letter calling on the government to “cancel their lawless job tax increase until we can have an election.”
Given the importance of the issue to businesses across the country, ensuring there is a thoughtful debate on this issue should be of critical importance; Canadian businesses across Canada deserve it.
Ken Lancastle is the Chief Operating Officer at the Mechanical Contractors Association of Canada. Send Industry Perspectives Op-Ed comments and columns ideas to editor@dailycommercialnews.com.
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