On the morning of January 6th, 2025, before announcing to Canadians his upcoming resignation as leader of the Liberal Party of Canada and Prime Minister, Prime Minister Trudeau met with the Governor General of Canada to request the prorogation of Parliament until March 24th, 2025. While much ink will continue to spill on internal Liberal Party machinations and intrigue for la suite des choses in their leadership race, it is timely to consider the impact of prorogation on Parliamentary and government business prior to the next federal election.
Introduction
While the government’s agenda had already largely ground to a halt throughout the fall due to ongoing debate on the privilege motion initiated by the Conservatives, the government was still able to pass supply and to get the temporary GST Holiday rebate through Parliament through a Speaker of the House of Commons’ ruling and support from the New Democratic Party, respectively.
However, with Parliament now standing prorogued until March 24th, 2025, all parliamentary business has been effectively paused. The legislative agenda in theory will be reset upon Parliament’s return, but the political winds of opposition parties currently seeking to bring down the government, regardless of the leader at its helm, suggest a very low likelihood for any further legislative process with this Parliament. Further, while government business will continue throughout the prorogation period, in practical terms, the Prime Minister and his office will have less centralizing cross-governmental authority, and the bureaucracy may increasingly slip into de facto caretaker mode.
This bulletin on prorogation, a follow-up to our previous bulletin, "Prorogation of Parliament" , focuses on the impact of the Prime Minister’s decision to prorogue on both Parliamentary and government business in the context of the current Canadian political climate with a Prime Minister whose authority is diminished pending the Liberal leadership race to replace him, and the imperative of preparing for the Trump Administration 2.0.
January 6th, 2025 Prorogation
Pause in Parliament While the Business of Government Continues
In proroguing Parliament last week, Prime Minister Trudeau stated that "the fact is, despite best efforts to work through it, Parliament has been paralyzed for months after what has been the longest session of a minority Parliament in Canadian history." In justifying his decision to prorogue rather than dissolving Parliament and calling an election, Prime Minister Trudeau said: "Anyone who's been watching politics closely over the past months will know that Parliament has been entirely seized by obstruction, by filibustering and a total lack of productivity. It's time for a reset. It's time for the temperature to come down."
The distinction between prorogation and dissolution of Parliament is critically important, at least in theory, with the Trump Administration 2.0 set to (officially) begin on January 20, 2025. Mr. Trudeau has stated that his decision to stay on as Prime Minister during this time is to deal with the economic threats from President-Elect Donald Trump. Unlike dissolution of Parliament in advance of an election, during a period of prorogation, the Speaker, the Prime Minister, Ministers and Parliamentary Secretaries remain in office and all Members of the House retain their full rights and privileges. Government business officially continues through prorogation, with the government retaining the authority to make and adopt new regulations and take other non-legislative, executive action (including imposing retaliatory tariffs), and the bureaucracy continuing to operate. However, the political and bureaucratic dynamics in Ottawa have fundamentally shifted, hampering government decision-making and action. At the same time, the relationship between the federal government and provincial and territorial Premiers, who are themselves preparing for the incoming Trump administration, is also impacted, potentially undermining the Team Canada approach.
What Happens Next?
Potential for Legal Challenges
While we do not know what transpired during the conversation between the Prime Minister and the Governor General, it appears that the Governor General quickly arrived at her decision to grant prorogation. We nonetheless should expect judicial challenge(s) to her decision, which may explore the impact of a recent United Kingdom Supreme Court’s judgment on the Canadian constitutional order, which held that then-Prime Minister Boris Johnson’s prorogation, without justification, in the run-up to a possible no-deal Brexit was not lawful.
Death of Bills, Legislative Initiatives
Prorogation of a session usually brings to an end all proceedings before Parliament. Government bills that have not received Royal Assent prior to prorogation ‘die’ on the Order Paper and must be reintroduced as new bills in the next session. As committees are extensions of the House with their powers limited entirely to the authority delegated to them by the House, committee activities also cease with no committees sitting post-prorogation.
There continue to be several important legislative efforts that are affected by prorogation and the likely spring election to come.
Capital Gains Inclusion Rate
Most notably, there is a very strong likelihood that the Liberals’ controversial increase to the capital gains inclusion rate, effective as of June 25th, 2024, no longer has a pathway for becoming law, given the increasingly compressed parliamentary calendar and lack of opposition support in the government’s agenda. Through Budget 2024, the government intended to increase the rate individuals pay on capital gains above $250,000 from one-half to two-thirds, and for all gains for trusts and corporations. The Conservatives have signaled their opposition to this measure.
Despite its low likelihood of passage into law this Parliament, the Canada Revenue Agency (CRA) appears to be operating as though this measure has been enacted, according to long-standing convention, until it is told otherwise.
With tax filing season quickly approaching, the CRA has announced that it will have tax forms reflecting the new inclusion rate by the end of January.
Moreover, "if Parliament is dissolved for an election before the higher inclusion rate has become law, the CRA will continue to administer the proposed legislation. The exception would be if the government dissolved as a result of a vote on a motion of non-confidence directly related to the proposed measure. In such a case, the CRA would cease to administer the proposed measure."
Only in the eventuality that the government otherwise signals its intent not to proceed with the measure would the CRA stop administering it. Should the Conservatives form government after the next election, all eyes will be on them and whether they ultimately choose not to go forward with it. The Conservatives' finance critic, Jasraj Hallan Singh, told The Globe and Mail that "Conservative Leader Pierre Poilievre would not pursue the capital gains tax changes if he becomes the country’s next Prime Minister."
The impact of this potential change in policy is serious. Those who had sold property before the June 25th cut-off to avoid the capital gains inclusion rate hike could regret their decisions, while others will have undergone considerable tax planning unnecessarily. Should the measure eventually be reversed, the CRA will need to reassess taxpayer returns that had used the higher inclusion rate, which could result in a tax refund. Taxpayers may need to file amended tax returns or object to the initial assessment of their returns based on the higher inclusion rate. Filing on the basis that the inclusion rate proposals will not come into effect, also has risks as there is no certainty that the measure will not eventually come into force. We will continue to follow this matter closely.
Fall Economic Statement
While Chrystia Freeland’s pre-emptive resignation drew most of the attention away from the government’s Fall Economic Statement, the document contains a series of proposed legislative measures that are now less likely to ever become law. This notably includes:
- the implementation of Canada’s Consumer-Driven Banking Framework;
- amendments to the Criminal Code’s criminal interest rate provisions to "crack down on predatory lending";
- amendments to the Canada Business Corporations Act to create a regulatory authority that provides for climate-related financial disclosures by large federally incorporated private corporations;
- amendments to the Export and Import Permits Act to enable the government to restrict importation or exportation of items in response to actions of another country that harm Canada or to create more secure and reliable supply chains;
- the introduction of legislation to strengthen the import ban on goods produced using forced labour;
- amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to strengthen Canada’s anti-money laundering and anti-terrorist financing framework by introducing universal enrollment for reporting entities, permitting disclosures to the Office of the Commissioner of Canada Elections; as well as strengthening penalties and supporting compliance with requirements;
- the introduction of a Small Business Innovation and Procurement Act to establish a Canadian small and medium-sized business procurement target and a Canadian innovative business procurement target;
- amendments to the Yukon Environmental and Socio-economic Assessment Act to exempt certain projects from re-assessment with consent from affected Yukon First Nations to promote more efficient and effective regulatory processes in advance of a more comprehensive review of the Act;
- amendments to the Customs Act to compel carriers and sufferance warehouse operators to grant access to Canada Border Services Agency (CBSA) officers to examine goods destined for export, as well as obligate owners and operators to provide adequate facilities for these officers to carry out the CBSA’s mandate; and
- amendments to the Immigration and Refugee Protection Act that would uphold the integrity and fairness of the asylum system, including by streamlining the intake, processing, and adjudication of claims.
Canada Elections Act
Proposed amendments to the Canada Elections Act, through Bill C-65, which had been at the heart of the now "ripped up" Supply and Confidence Agreement between the Liberals and the New Democratic Party would not likely advance.
Bill C-282
The fate of the Bloc Québécois MP’s initiative, Bill C-282, which would exempt agricultural supply management (dairy products, poultry and eggs) from any future trade negotiations has also likely been fatally compromised, based on the likely parliamentary path forward. This formed one of the main Bloc Québécois demands to the Liberals to achieve by October 29th, 2024, in exchange for their temporary support on confidence votes.
Other Major Government Bills
There are also a host of other major government bills that will now likely be compromised, including major reforms relating to cybersecurity to the Telecommunications Act (Bill C-26), the government’s long overdue reforms to federal privacy laws, which had been combined with its attempt to regulate artificial intelligence use in Canada (Bill C-27), the government’s proposed online safety regime (Bill C-63), a new framework for First Nations Clean Water (Bill C-61), and the modernization of the military justice system (Bill C-66).
Border Security Plan
On December 17, 2025, the government released Canada’s Border Plan supported by a proposed $1.3 billion in federal funding to address president-elect Donald Trump’s threat of 25 percent tariffs on all Canadian goods if Canada did not address border security issues. While not all measures contained in the Border Plan require parliamentary approval, other elements do, including giving authority to customs officials to examine exports and other proposed changes to better enable Canada to retaliate against the U.S. or other countries in trade disputes.
March 24, 2025: What Will Happen When Parliament Returns?
Prime Minister Trudeau stated that confidence votes that come after March 24 will "allow Parliament to weigh in on confidence in a way that is entirely in keeping with all the principles of democracy."
Whether the government stands or falls should be tested almost immediately when Parliament resumes as the machinery of government is running out of "supply" (money) to carry on government business. The government is facing a deadline at the end of March for approval of an "interim supply" bill to authorize departments to spend money.
As a supply bill is inherently a confidence measure, the opposition parties would be able to bring the government down. As all parties are now on the record of wanting Parliament to be dissolved as soon as possible for an election, it would seem that Canadians will be going back to the polls in the Spring. It also remains possible that the next Prime Minister could decide not to subject their government to the confidence of the House, and dissolve Parliament in favour of an early election call on their own terms before March 24th. Whichever the ultimate path forward is, we should all continue to expect the unexpected in 2025.
