(OTTAWA) The Parliamentary Budget Officer estimates that the federal Liberals’ planned 2% tax on public company share buybacks would generate $3 billion in tax revenue for the government over the next five years.
A new report prepared by the office of Yves Giroux assesses the impact that this new tax could have on public finances between the 2023-2024 and 2027-2028 fiscal years.
In their Fall Economic Statement, the Liberals pledged to impose, starting on 1is January 2024, a 2% tax on the net worth of all types of share buybacks by public corporations in Canada.
The government then estimated that this tax would bring in 2.1 billion over the next five years. The Parliamentary Budget Officer speaks instead of $3 billion in revenue.
This tax measure targets an operation commonly used by business leaders to reward shareholders when a company is doing well.
Companies then buy back their own shares to reduce the number of securities available on the market, which normally increases the value of the shares of the company that remain outstanding.
By wanting to tax share buybacks, the government wants to encourage companies to instead reinvest their profits in their activities.