Trudeau to propose new tax on stock buybacks in Canada

(Bloomberg) – Prime Minister Justin Trudeau’s government will propose a tax on corporate stock buybacks in a bid to encourage companies to invest in domestic operations and workers, The Canadian Press reported.

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The story, which quotes an unnamed government official, did not specify which plan will be part of Finance Minister Chrystia Freeland’s budget update on Thursday. A person familiar with the document told Bloomberg News the report was accurate, without providing further details.

Canada’s move follows the United States, which imposed a 1% excise tax on corporate stock buybacks as part of the Cut Inflation Act signed into law by President Joe Biden in august. Freeland, who will speak in the Ottawa legislature around 4 p.m., is also expected to provide details on his response to other measures in Biden’s legislation, including new U.S. clean energy incentives.

There will also be new money to help some Canadians with the rising cost of living. Freeland will use some of the windfall revenue this year to help low-income students and workers, according to the Globe and Mail, citing unnamed government sources. In March, Trudeau struck a power-sharing deal with the left-leaning New Democratic Party, which pledged support for its Liberals in the minority parliament in return for more spending on social programs.

Trudeau and Freeland are trying to strike a balance between helping Canadians cope with soaring consumer prices and trying to promote business investment, while avoiding fueling inflation through overspending. Economists expect the larger-than-expected revenue gains to see this year’s deficit between C$20 billion ($14.7 billion) and C$30 billion less than the gap of C$53 billion budgeted in April.

The story continues

In September, Freeland announced a package of measures including a temporary increase in the sales tax refund for low-income Canadians at a cost of C$2.5 billion ($1.8 billion) and a benefit top-up. rental housing worth approximately C$700 million.

The Canadian government is also under pressure to provide a vigorous response to new US investment incentives, with manufacturers pushing for more generous support to build greener facilities and the oil and gas sector wanting Canada to catch up with the US in tax credits for carbon capture technology. .

Biden’s buyout measure aims to encourage companies to use their cash to invest capital in expansion. But some executives say the tax is not large enough to deter share buybacks.

(Updates with new measures for students in the fourth paragraph.)

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