In its autumn economic update, the federal government in Ottawa announced plans to levy a 2% tax on stock buybacks beginning in 2024.
The so called “minibudget” said that the new tax will come into effect on January 1, 2024, and that more details will be announced in next spring’s federal budget.
However, the Finance Department estimates that the stock buyback tax will generate $2.1 billion in annual revenue over the next five years.
In the economic update, the government said that its aim with the new tax is to encourage corporations “to reinvest their profits in their workers and business” rather than rewarding shareholders.
The stock buyback tax is nearly identical to one that was introduced in the U.S. this past August by President Joe Biden. However, the U.S. tax amounts to a 1% levy on stock buybacks rather than the 2% being proposed in Canada.
The U.S. tax on stock buybacks is scheduled to go into effect next year (2023).
