Projected revenue from capital gains tax falls short of government expectations, says PBO

The Parliamentary budget officer is projecting an increase of $17.4 billion in income tax revenue from 2024-25 to 2028-29 from the Liberal government's increases to the capital gains tax.

In a report released Thursday morning, the PBO's estimates fell short of the government's projected revenues from the tax changes, which were pegged at $19 billion for the same timeframe in the 2024 budget. The PBO said the tax revenue could even be as low as $15.6 billion when factoring in increased volatility.

The added tax revenue was unveiled as a way to cover billions in new spending in the budget.

The increase to the «inclusion rate» on capital gains, which came into effect on June 25, saw an increase from one-half to two-thirds on capital gains above $250,000 for individuals.

The change will tax all capital gains earned by corporations and trusts at the two-thirds rate.

Capital gains from selling a principal residence are tax-exempt.

The PBO used tax returns from the Canada Revenue Agency to calculate the historical ratio of capital gains on the total tax base for individuals, trusts and private corporations. The PBO combined those ratios with its own internal fiscal projections to formulate its latest figures on how much money the tax increase would generate.

A spokesperson for the PBO told CBC News they didn't have concrete data on how many Canadians the tax hike would impact, but hoped to look into it down the road. The government had projected 0.13 per cent of Canadians would pay more in personal income tax on their capital gains as a result of the change.

Individuals have options to mitigate impact: PBO

In its analysis, the PBO said it also accounted for the likely kneejerk response from taxpayers to liquidate assets in the 10 weeks