Tory Government Would Allow Deferral of Capital Gains Taxes

Today, the Tories announced that they would allow deferral of capital gains taxes. They would

. . . eliminate the capital gains tax for individuals who reinvest profits earned from selling real estate or financial investments within six months

This would be quite a significant change from the way things work right now. These days, if you sell a stock or mutual fund, for example, and buy a new one with your cash, you have to pay taxes on your capital gain when you sold the investment. This proposed policy would effectively allow Canadians to transfer money from one investing into another (with up to 6 months between selling and buying) without paying taxes (hmm, sounds like an RRSP!). You will, however, pay taxes when you eventually sell your investment, when you retire, for example, and cash out:

But he pointed out that the move only defers the payment of capital gains tax. Those taxes will still be paid at the point when the assets are sold without being reinvested. “At some point people need to check out – they need to take out those investments and live off them,” Williamson said. “There’s nothing here that will help individuals who are checking out.”

So it is acting as a tax deferral mechanism just like RRSPs. And some final words from the Canadian Taxpayer’s Federation:

John Williamson, federal director of the Canadian Taxpayers Federation, called the Conservative measure a positive move that would create new pools of capital for businesses. Investors would be able to better manage their portfolios because it will be possible to sell a stock and re-invest without paying capital gains tax, he said. “This is very good, and significant.”

This does not mean that you should vote for the Conservative party. You should of course, look at ALL the issues. This tax cut will have consequences, such as lost revenue for the government which will have to be made up somehow, either through higher taxes somewhere else, decreased spending, or decreased surplus/increased deficit.