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Chapter 3
Fair and Effective Government

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Building an economy that works for everyone, with a strong social safety net, requires a robust national tax base where big corporations and the wealthiest Canadians pay their fair share, and where everyone plays by the same set of rules.

The 2022 Fall Economic Statement announces plans to tax share buybacks, and reaffirms the government’s intention to introduce a new minimum tax regime for the wealthiest Canadians, and its intention to implement a global minimum tax regime to ensure that large multinational corporations cannot avoid paying taxes, regardless of where they do business.

The federal government is also taking action to ensure that Canadians’ tax dollars are being used effectively, and that Canadians can count on effective government services.

3.1 A Fair Tax System

A Tax on Share Buybacks

A share buyback occurs when a corporation buys its own stock back from existing shareholders. While buying back shares is one legitimate way that corporations can return value to their shareholders, it can also divert corporate resources away from making investments in their workers and businesses in Canada.

It is estimated that this measure would increase federal revenues by $2.1 billion over five years, starting in 2023-24, while also encouraging corporations to reinvest their profits in their workers and business.

International Tax Reform

Canada is committed to ensuring multinational corporations pay their fair share of tax wherever they do business, and the government is working with international partners to make that happen.

Canada and 136 other members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting have developed a two-pillar plan for international tax reform, which was agreed to in October 2021. The Framework, if implemented, will end the race to the bottom in global taxation and put Canadian workers and businesses on a level playing field with our global competitors.

Pillar One (Reallocation of Taxing Rights)

Pillar One will ensure that the largest and most profitable global corporations, including large digital corporations, pay their fair share of tax in the jurisdictions where their users and customers are located. Significant progress has been made in establishing the technical rules of the new system, and the OECD has been conducting ongoing public consultations. The Inclusive Framework’s intention is to complete multilateral negotiations so that the treaty to implement Pillar One can be signed in the first half of 2023, with a view to it entering into force in 2024.

Pillar Two (Global Minimum Tax)

Pillar Two, a global minimum tax regime, would ensure that multinational corporations are subject to a minimum effective tax rate of 15 per cent on profits in every jurisdiction in which they operate. To function effectively, Pillar Two requires participation and extensive coordination from international partners around the world.

Canada is committed to the global minimum tax on large corporations. We continue to work closely with our international partners to develop a coordinated implementation framework, to be put in place in a timely and coordinated manner.

Through both pillars, the government remains committed to ensuring that those who do business in Canada pay their fair share of taxes and that there is a level playing field for Canadian workers and businesses in the global economy.

Ensuring the Wealthiest Canadians Pay Their Fair Share

Through significant use of deductions, tax credits, and other ways of having income taxed at lower rates, some of the wealthiest Canadians pay comparatively little personal income tax as a share of their income.

The Alternative Minimum Tax (AMT) is intended to ensure that high-income Canadians cannot disproportionately lower their tax bill through advantages in the tax system, but it has not been substantially reviewed since its introduction in 1986.

In Budget 2022, the government committed to examining a new minimum tax regime to ensure that all wealthy Canadians pay their fair share of tax. The 2022 Fall Economic Statement reaffirms this intent, and a detailed proposal and path for implementation will be released in Budget 2023.

3.2 Effective Government

Improving Service Delivery

Canadians should be able to count on efficient, timely, and high-quality government services. In June, the government created a new task force to improve government services, with a mandate to review service delivery, identify gaps and areas for improvement, and make recommendations to ensure Canadians from coast to coast to coast receive the highest quality of service, and wait times for service are reduced. That is why, in recent months, the government has made significant investments to improve the services Canadians rely on. This includes:

The government is also taking action to reduce wait times in the immigration system, including:

Addressing the Digitalization of Money

The rise in cryptocurrencies and the digitalization of money are transforming financial systems in Canada and around the world. Canada’s framework for the regulation of our financial system needs to keep pace. At the same time, the digitalization of money poses a challenge to democratic institutions around the world. In the last several months, digital assets and cryptocurrencies have been used to avoid global sanctions and fund illegal activities, both in Canada and around the world. In order to help address these challenges in Canada, Budget 2022 announced the government’s intention to launch a financial sector legislative review focused on the digitalization of money and maintaining financial sector stability and security.

Consultations with stakeholders on digital currencies, including cryptocurrencies, stablecoins, and central bank digital currencies, are being launched on November 3, 2022.

Overview of Gender-Based Analysis Plus

A Tax on Share Buybacks: Shareholders are disproportionately older men, and tend to have higher incomes. In 2019, men (62 per cent), people aged 65 and over (38 per cent), and people with more than $100,000 in annual income (63 per cent) accounted for disproportionate amounts of dividend and interest income received by Canadians. Comparatively, men and seniors account for 49 per cent and 16 per cent of the Canadian population, respectively. Revenue from this measure will contribute to paying for general government programs and expenses, which benefit Canadians, particularly the middle class.

Improving Service Delivery for Canadians will focus on ensuring that Canadians have access to the services they rely on in order to address their unique needs. Low-income individuals rely on the timely, consistent delivery of these benefits, which these investments will help ensure. In particular:

Chapter 3
Fair and Effective Government
millions of dollars
3.1 A Fair Tax System 0 -30 -440 -520 -550 -580 -2,120
A Tax on Share Buybacks 0 -30 -440 -520 -550 -580 -2,120
3.2 Effective Government 575 827 673 126 24 24  2,250
Improving Employment Insurance and Old Age Security Service Delivery 215 661 620 101 0 0 1,597
Canada Revenue Agency Call Centre Post-Pandemic Sustainability 290 110 0 0 0 0 400
Improving Service Delivery for Veterans 40 35 31 3 3 3 115
Canada Border Services Agency Frontline Capacity 31 21 21 21 21 21 137
Chapter 3 - Net Fiscal Impact 575 797 233 -394 -526 -556  130

Action on Budget 2022 Spending Reviews

The federal government remains focused on managing public finances in a fiscally responsible manner.

In Budget 2022, the government committed to reducing the pace and scale of previously announced spending that has yet to occur by up to $3 billion over the next four years. The 2022 Fall Economic Statement delivers on this commitment with reduced spending of $3.8 billion, owing to the lower-than-expected uptake of COVID-19 supports in 2021-22 (Table 4.1).

In Budget 2022, the government also announced the launch of a comprehensive Strategic Policy Review to assess program effectiveness and identify opportunities to save and reallocate resources without impacting services to Canadians. This ongoing review will target savings of $6 billion over five years, starting in 2024-25, and $3 billion annually by 2026-27.

Budget 2023 will provide further details on how the savings target will be achieved.

Table 4.1
Update on Reducing Planned Spending in the Context of a Stronger Recovery
millions of dollars

Reduction in scale of spending (2021-22):
Business Income Supports -3,209
of which:
Canada Emergency Wage Subsidy
Canada Emergency Rent Subsidy
Canada Recovery Hiring Program
Targeted Supports for Deeply Affected Businesses
Emergency Personal Income Supports -589
Total -3,798
Budget 2022 Target -3,000
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