Opinion: It’s time to stop complaining about the capital gains hike

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It may seem strange for anyone to welcome new taxes, especially ones they have to pay. I believe I am in the top 1% of Canadian taxpayers. So, is what you're about to read an endorsement of Finance Minister Chrystia Freeland's increase in the capital gains tax? Yes and no. It is easy to refuse: we are all against new taxes. But it's not that simple. And that's the problem – no one is trying to provide the full picture, understanding which would help evaluate the merits of this particular tax initiative.

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Let's start at a high level. The Canadian economy is not performing well compared to its peers. We're losing a lot of metrics: GDP growth, productivity, average basic income. It's not pretty. The government's mission is to reverse this trend and show leadership. Nearly twenty years ago, I sat with Mike Lazaridis and Joe Rotman on a panel that examined our failure to match Americans in effectively commercializing the research activity carried out in Canada, in both the public and private sectors. It is unfortunate that this remains a barrier, but important changes are happening now, such as the Creative Destruction Lab (which I chair), which was born at the University of Toronto and is now a global technology incubator of real significance.

More importantly, the country is not investing aggressively in those sectors where the global economy is on fire. We're pretty good at working with big language model AI, and in fact we were involved in its infancy. But American investment capital and a high appetite for risk south of the border — far beyond what we would like to tolerate — quickly shifted that industry's growth there.

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This reticence in dealing with aggression extends to huge capital commitments in fixed assets. As a minister in the current government once said to me: “We seem unable to build large projects in this country.” I bear witness to the obstacles facing the expansion of the Trans Mountain Pipeline. Big capital is moving away from Canada, making it difficult to do big things, and this has to change.

We are an energy force, but today's energy and tomorrow's energy are two different things. The government has invested billions in convincing car companies to build their battery factories here. Battery technology has applications across the energy sector, not just electric vehicles. Our iron ore ranks among the best in the world for making green steel. There are multiple opportunities for Canada to lead the green revolution. But it requires significant investment and we must compete for that investment with others, including the Biden administration, which is spending hundreds of billions to stimulate private sector activity.

Do we want to be players or not? Do we want to be at the forefront of the trillions – yes, trillions – of dollars that will be spent on the green transition over the next 25 years? If so, the government must play a leadership role. But wait: We can't borrow money as cheaply as our American counterparts, who have the world's only reserve currency. We must pay more attention to the fiscal deficit, and our national budget or delta in the cost of our borrowing will continue to expand. However, our currency will sink – and no country has achieved a thriving economy and meaningful increases in the population's standard of living on the back of a cheap currency.

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The truth is that we have difficult choices. Invest or go home. Be financially responsible or you won't be able to invest. Be careful about tax policy and implement it so that it does not weaken the incentive to invest, but rather generates income so that we can invest. Will this latest increase in the capital gains rate be a backbreaker? I don't believe it for a second. Those who have to pay more will not like to do it, but I would like to represent that we love our country and it is full of opportunities. We need to work together to make it the country we all want to be proud of, so get back to work and stop complaining.

John Risley is Chairman and CEO of CFFI Ventures Inc.

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