Finance Minister Chrystia Freeland plans to return to budget surpluses in 2027-2028, at least in her “reference scenario”. In its latest budget, presented last spring, the government did not yet foresee a return to a balanced budget. Should a pessimistic economic scenario materialize, the government would continue to juggle deficits.
Chrystia Freeland also announced two new support measures for individuals.
– Elimination of interest on student loans
The Canadian government proposes to “permanently eliminate the federal portion of interest on all Canada Student Loans and Canada Apprentice Loans, including those currently being repaid”. The Quebec state, which administers its own loan and bursary program, will benefit from compensation if it in turn cancels the interest on student debt, promises the federal government.
– Enhancement of the Canada Workers Benefit
Starting next spring, Ottawa will pay the Canada Workers Benefit (CWB) to low-income Canadians in three “automatic advance payments”, rather than the following year. People who see their wages jump from year to year will not have to repay the ACT benefits they would have received even if they were no longer eligible. Some three million Canadian workers “among the lowest paid, and often the most essential” will benefit from assistance of 4 billion dollars over six years, estimates Ottawa. “We are creating new quarterly advance payments for the Canada Workers Benefit. This is going to help the lowest paid workers – who are very often among the most essential – by putting more money in their pockets, faster,” said Chrystia Freeland.
These two new assistance measures are in addition to the enhancement of the Goods and Services Tax (GST) Credit for six months, the expansion of the Canada Housing Benefit Supplement, as well as the Dental Benefit Canada, which have been announced over the past few months.
The economic statement also includes measures to stimulate the Canadian economy, as the government fears weaker than expected economic growth; and higher than expected inflation.
– Taxation of share buybacks
Ottawa intends to introduce a new tax of 2% on the redemption of shares by companies. Thanks to this measure, the Liberal government hopes to “discourage” companies from rewarding their shareholders by buying back shares, and instead using their profits to allocate them to the financing of projects. Thus, the government hopes in particular to stimulate productivity, as well as research and development. The details of this tax, however, will not be revealed until the next budget, in the spring of 2023, and the tax would come into force on January 1, 2024. In the United States, too, such a measure has also been adopted, but this one does not is only 1%.
– Significant investment tax credits in clean technology and clean hydrogen
As a response to the American policy of massive investments in the fight against climate change, the Government of Canada is unveiling the details of the Canada Growth Fund (CGF), already announced in the last budget. The fund has a capital of 15 billion dollars. The fund is supposed to counterbalance the Inflation Reduction Act (IRA), adopted this summer in the United States. ” It’s a game changer for climate transition and for industrial reconstruction in North America for the next few years,” said a senior official in reference to the IRA, which provides nearly 370 billion US dollars (equivalent to C$520 billion) in new spending on climate change and energy as well as growing the economy.
To remain competitive, Ottawa is introducing new tax credits: an investment tax credit for clean technologies and an investment tax credit for clean hydrogen.
– Reduce credit card transaction costs for small businesses
The federal government has set out to reduce credit card transaction costs for small businesses, “without harming other businesses and protecting existing consumer rewards points.” “If the industry fails to reach an agreed solution over the next few months, Parliament will amend the Payment Card Networks Act to get there, he warns.
– 1.3 billion set aside due to Fiona
The federal government is setting aside some $1.3 billion to “rebuild Atlantic Canada and eastern Quebec after Hurricane Fiona.” On October 4, Ottawa contributed $300 million to the Hurricane Fiona Recovery Fund, including $100 million to “rebuild small craft harbors and recover ghost gear.” Today, it provides a $1 billion budget provision in anticipation of provincial claims related to Disaster Financial Assistance Arrangements. These plan to cover up to 90% of eligible provincial expenses following a disaster, including those related to “evacuation, transportation, emergency food aid, shelter and clothing, the repair of public buildings and related equipment, roads and bridges, and the restoration or replacement of uninsurable essential real estate of individuals, small businesses and farms”.
More details will follow…