Good morning, everyone. I'll be quick.

The increase in the capital gains inclusion rate announced in budget 2024 will take effect next week. For individuals, there is a $250,000 threshold before the change applies. For corporations and trusts, the increase in the inclusion rate to 66.67% will apply on the first dollar of realized capital gains.

The question for me is not so much whether capital gains taxation reform is relevant. I believe that, in the long run, the advantages outweigh the disadvantages and that the implementation of the reform must be encouraged. That said, I would like to take a step back with you to better assess the situation.

This is not the first time changes have been made to the capital gains inclusion rate, nor is it the first time such changes have taken place during the year. How have these changes been made in the past? Without going too far back, I would remind you that, in 1971, we still had six months between the introduction of the bill that led to the taxation of capital gains and its implementation on January 1, 1972. When the inclusion rate changed in 1988, it was announced six months in advance when a white paper on tax reform was tabled, but it took two weeks for the tax change to come into effect so that a notice of a ways and means motion could be tabled. In addition, the bill was introduced after the change came into effect.

That is somewhat similar to the current situation. Obviously, from a good practice perspective, it would have been desirable for the legislation relating to the changes to be made available to practitioners as early as the April 2024 budget. It would have made their jobs a lot easier and, above all, it would have helped taxpayers better plan their affairs. Even today, some taxpayers are struggling to understand the changes and get advice, as tax practitioners are currently overwhelmed.

That said, I have identified four areas of concern that I would like to discuss with you. Obviously, since the notice of a ways and means motion was tabled only last week, other issues will surely come up later.

The first concern is flexibility. It would be possible to give taxpayers the choice of realizing capital gains on paper before June 25, with no real disposition—that is, through a deemed disposition. I made that proposal, which was also made by the Joint Canadian Bar Association/Canadian Professional Accountants of Canada Taxation Committee.

Some will say that today, June 18, is too late to give such a choice to taxpayers. I disagree because it's never too late to do the right thing. Providing such a choice would give taxpayers time to see if it would be in their interest to trigger a capital gain before the change comes into effect. This choice would be transmitted at the same time as the tax return—in other words, in early 2025. So people would have more time to incorporate the change and it wouldn't fundamentally change the new rules, which would still come into effect after June 25. Therefore, providing such a choice would have the advantage of avoiding hasty actions. It would also give taxpayers a fairer chance. Some assets may be more difficult to dispose of than others before June 25. Selling shares on the stock market is easy to do, but selling a building is not as easy. So I think providing that choice would be advantageous.

The second issue of concern is the unintended retroactive effect that emerges from the analysis of the notice of a ways and means motion. I have consulted tax experts who are members of the Association de planification fiscale et financière and work in Quebec. Because of the way the motion is written, transactions in capital dividend accounts, such as a dividend paid, done in January, before June 25, or even before the budget was presented, could be impacted. The way the year of that June 25 is taken into account could apply to a capital dividend account. I think it is undesirable and I think it is even unwanted. I hope that the next version of the bill will eliminate that element.

My third concern stems from the fact that this is the first time that a $250,000 protection has been granted to individuals. There will no longer be a perfect symmetry between the taxation of capital gains for individuals and for corporations. This creates a problem of overtaxation, when an attempt is being made to be neutral with regard to corporate and personal revenues. I am not saying that companies should be offered $250,000 in protection as well, but I would point out that this leads to a bigger over-integration problem after June 25.

In closing, since time is running out, I will address one last point. The $250,000 in protection provided to individuals should be indexed. If the tax schedule is indexed and the lifetime capital gains exemption is indexed, the $250,000 amount should be indexed for subsequent years.

With that, I thank you for your attention, and I remain at your disposal for questions and discussions.