Economic Update | Money for low-income workers, students and green techs

In a more gloomy economic context marked by persistent inflation, Finance Minister Chrystia Freeland showed restraint in her fall economic update. The aid measures in its fall economic statement are essentially aimed at helping the less well-off and stimulating business investment. Overview.

Posted at 4:06 p.m.

Julien Arsenault

Julien Arsenault
The Press

A more generous additional income

Year after year, some three million employees who are struggling to make ends meet can count on the Canada Workers Allowance (ACT) to make ends meet. The economic update enhances this benefit with an envelope of $4 billion spread over six years.

The Trudeau government’s announcement — one of the key measures in the economic statement — comes in three advance payments. A single person can get up to $714 more and a family can get an extra $1,231 to buy “essentials” and pay their rent.

According to the scenario given as an example in the economic statement, a worker who earns $25,000 annually would be eligible for additional assistance of $600 spread over three payments.

No interest for students and apprentices

Ottawa had already waived interest charges on student loans since the start of the pandemic, but this relaxation expires on March 31.

The next day, i.e. the 1er April 2023, interest for the federal portion of student loan interest will be a thing of the past. The commitment will also apply to currently repaid loans. On average, the annual savings for a student or apprentice should be $410.

“The entry of new graduates into the job market should be easier, and not the other way around,” underlines the Trudeau government, in its fall update.

The decision comes with a bill: 2.7 billion over the next five years. Subsequently, this waiver of interest on student loans should cost 556.3 million annually.

Real estate: help to buy and renovate

Rising interest rates are not only driving up household mortgage payments, they are also making it harder for new buyers to access home ownership.

The tax credit for the purchase of a first home will be doubled, which would allow new buyers to recover up to $1,500.

At the same time, owners who decide to host an adult person with a disability will be entitled to a tax credit of $7,500 for “the renovation of multigenerational dwellings” from the beginning of 2023.

However, these measures will have to be adopted through a bill to come into force, the economic update says. Changes could thus be made.

A gap to be made up in investment

While private investment levels have exceeded pre-pandemic levels in the United States, Canada is still below what was seen in 2019, according to a senior official.

The economic statement contains a few initiatives to try to reverse this trend. The main one is a refundable tax credit of up to 30% of the investment in “clean technologies”.

This tax measure concerns everything related to zero-emission concepts, battery storage and clean hydrogen. This tax credit is expected to cost $6.7 billion over five years.

It is one of the first actions taken by the Trudeau government in response to the Inflation Reduct Act, this law adopted in the United States by the Biden administration which provides hundreds of billions in subsidies and tax credits for everything related to the electric vehicle and renewable energy industry.

A fee to redeem shares

Companies can spoil their shareholders by buying back their own shares. This is a way of returning capital to investors. Ottawa believes that companies should instead reinvest this money in initiatives such as research and development.

To achieve this, the Trudeau government intends to impose a 2% tax on companies that would apply to the net value of any type of share buyback. The details will be revealed in the next budget and the measure – which is inspired by what was announced in the United States – would come into force in 2024.

“Many Canadian companies do not think enough about the next innovations, where to invest,” says a senior official. Yet this is what we need. »

Once in force, this new tax would raise $2.1 billion over five years starting in the 2023-2024 fiscal year. Senior officials explained that the objective was not to punish companies, but to accelerate private investment.

Credit card fees: ultimatum to issuers

Many small and medium-sized businesses feel suffocated by fees charged by credit card issuers. According to the Canadian Federation of Independent Business (CFIB), merchants must pay between 1.5% and 4% of the total invoice amount (with taxes) each time a consumer pays for a transaction with their card.

The economic update sends a warning to credit card companies as well as banks: if we do not agree to reduce these fees imposed on merchants, the federal government will decide.

Several questions still remain unanswered in this file, in particular what would be a percentage considered reasonable paid by the merchants, but Ottawa warns that it will be necessary to agree in the “coming months”.

Otherwise, a new framework will be presented in 2023 and imposed by the federal government.


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