Canada to retain key Trudeau-era tax measures as Carney government drafts budget

Canada has unveiled a list of tax measures it intends to carry forward from the Trudeau era, even as Prime Minister Mark Carney moves to reshape the country’s fiscal priorities. According to Bloomberg, Finance Minister François-Philippe Champagne released draft legislation on Friday for consultation, confirming that many proposals first announced under former Prime Minister Justin Trudeau are still on track. The draft package includes changes to small business taxes, expanded credits, adjustments to capital gains exemptions, and enhanced powers for the national tax agency. Stronger reporting requirements for nonprofit organisations are also under review. Public feedback will be taken until September 12 before the legislation heads to Parliament later this year.

Bloomberg reported that most of the proposals were laid out in last year’s budget and fall economic statement. However, political uncertainty following the abrupt resignation of former finance minister Chrystia Freeland and Trudeau’s subsequent departure had raised doubts over which measures would survive under Carney’s leadership.

Carney signals shifts but keeps core

Not all Trudeau-era policies remain. Bloomberg noted that Carney has already rolled back an increase in the capital gains inclusion rate and suspended the consumer carbon tax, signalling a shift in fiscal direction. Still, by retaining several pre-Carney initiatives, the government is aiming for continuity while preparing to set out new spending priorities.

One technical change in the draft legislation would update sales tax exemptions, allowing input tax credits for redeemed coupons if used in the course of commercial activities. The move reflects a recent Canadian court of appeal decision.

Budget delayed to October

A government official told Bloomberg that Ottawa’s long-delayed federal budget will be tabled in October. The focus is expected to be on defence spending, housing, and a reallocation of fiscal resources away from consumption and towards investment—core themes in Carney’s election platform.

Economists warn, however, that Canada’s fiscal position is set to deteriorate further. The parliamentary budget officer and several forecasters project a deficit exceeding C$70 billion ($50.7 billion) in the current fiscal year. By comparison, the official forecast published last December had projected a C$42 billion shortfall, before Trump’s new tariffs and Canada’s federal election altered the fiscal landscape.

Balancing continuity and new priorities

Carney’s challenge lies in balancing continuity with change, keeping investor and business confidence stable by preserving key measures, while reshaping Canada’s fiscal trajectory towards investment-heavy spending. As Parliament prepares to resume later this year, the October budget will be the first major test of his government’s economic vision.

(With inputs from the agencies)