Thank you.

Good afternoon, committee members. Thank you for the opportunity to appear before this committee to discuss the capital gains proposals announced in budget 2024.

My name is Kim Moody. I'm a fellow of the Chartered Professional Accountants of Alberta and the founder of one of Canada's premier taxation and legal and accounting boutique advisory firms, Moodys Tax under Moodys Private Client. I have a very long history of serving the Canadian tax profession in a variety of significant leadership positions. I'm also a prolific writer and speaker on taxation matters. I write a weekly column on taxation for the Financial Post.

I spoke previously to this committee on September 24 about these matters, and I submitted my opening remarks at that time, but unfortunately, as noted by the chair, my remarks were marred by technology challenges, so I will simply update my remarks very briefly today.

With that, my updated comments are as follows.

Number one is the policy on capital gains. One can have a healthy and respectful debate on how capital gains are taxed. Should they be preferentially taxed? In my opinion, yes, absolutely, like they are in most countries around the world.

Prosperous countries realize that investors, including entrepreneurs, take significant risks that have extended, long-term benefits to society and the economy. Thus, the concerns when Canada introduced complex proposals earlier this year to increase the capital gains inclusion rate effective June 25, 2024.

For those who continue to mindlessly bleed out the “buck is a buck is a buck” line in support of the proposals, I'll repeat the comments made by former finance minister Edgar Benson in 1969. He said:

The government rejects the proposition that every increase in economic power, no matter what its source, should be treated the same for tax purposes. This proposition, put forward forcefully by the Royal Commission on Taxation, has often been summarized rather inelegantly as ‘a buck is a buck is a buck.’

But although the government does not accept this theory in all its splendid simplicity, neither does it believe that the distinction between a so-called ‘capital gain’ and an income receipt is either great enough or clear enough to warrant the tremendous difference from being completely exempt and being completely taxable.

I totally agree with that.

In addition, I often hear that employment risk is absolutely the same as entrepreneurial investor risk. Right? No, that's hogwash. To people who say so, I challenge them to put their money where their mouth is and put up their life savings, including their gold-plated pensions, and start a business. Do you think it's easy? Do you think it's a guarantee to riches? Do it. I dare you. By “starting a business”, I don't mean your one-man band consulting practice.

Number two is the disingenuous messaging. I have nothing further to add from my September 24, 2024, comments, other than to say I still shake my head at how this government is prepared to engage in misleading and shameful partisan politics to implement a simple tax grab. Canadians deserve better.

Number three is the implementation of the proposals. Again, I have nothing further to add other than a couple of quick comments. First, as we all know, today is November 5, 134 days after the proposals presumably became effective, and the very complex draft legislation is still not in the bill. What are taxpayers supposed to do? I wrote about that in my Financial Post article today. It's not simple. Frankly, it's shameful.

Overall, I'm very concerned about how these proposals will affect Canada's productivity, especially during a time of declining GDP per capita and the significant disincentive for entrepreneurs and/or investors to invest their capital and take strategic risks for the benefit of themselves and all of Canada. These poorly thought out proposals will cause significant damage to Canada.

Esteemed economist Jack Mintz recently wrote what the proposals will cause. He wrote that, “Canada’s capital stock will fall by $127 billion; employment would decline by 414,000; GDP will fall by almost $90 billion; and real per capita GDP will decline by 3 percent.” That is obviously significant and concerning.

Instead, we need, as Jack Mintz calls it, a “big-bang corporate tax reform”. I think we need a big bang personal tax reform as well that incentivizes and rewards Canadians to work harder and take risks. Frankly, it can't come soon enough.

Thank you. I'm happy to take questions.