CRA to collect increased capital gains taxes despite proposed hike not being passed into law

The Canada Revenue Agency expects Canadians to adhere to a proposed capital gains tax increase – despite the fact the measure may never be passed into law.

Now that Prime Minister Justin Trudeau has announced he is stepping down and has prorogued Parliament until late March, the Liberal legislative agenda has been left to wither in the wind.

That includes the motion that would increase the amount of tax Canadians owe when they sell assets and investments.

"If you believe that these proposals are likely not going to pass, then why blindly encourage taxpayers to comply?" asked accountant Kim Moody.

According to the federal Department of Finance, it is standard practice to begin collecting new or increased taxes before they have officially been enshrined in law.

"Parliamentary convention dictates that taxation proposals are effective as soon as the government tables a Notice of Ways and Means Motion; this approach provides consistency and fairness in the treatment of all taxpayers,” the department said in a statement to CTV News.

The CRA expects Canadians to file their taxes under the terms of the proposed changes, rather than existing law.

With a spring election likely, the next government could scrap the planned increase altogether, but not before the March 3 filing deadline for corporations and trusts affected by the proposed changes.

"To the extent that this proposal doesn't become law, and you filed on that basis, now you've got to amend, and you've got to wait for a refund,” Moody said.

That is the correct course of action, according to the CRA.

“Upon resumption of Parliament, if no bill is passed in the House of Commons, and the government signals its intent to not proceed with the proposed measures, the CRA will be ready to support taxpayers in ensuring any corrective reassessments of implicated returns are processed,” the Department of Finance said.

Amending a return for the CRA to assess, and then waiting for a refund, is not a simple process.

"Anybody who has experience with waiting for refunds from the CRA, it's not a pretty experience,” said Moody. “It's a great game of wait, wait, wait, wait.”

Alternatively, people could choose to attempt to file returns under last year’s regulations – but in the event the next government proceeds with the capital gains increase, they will have to pay interest on the additional amount owing.

They could also face additional financial penalties.