Share Buyback Tax Could Discourage Investment & Hurt Canada’s Economy

2% rate is higher than what is being discussed in the United States, and will further discourage investment in Canada.

The new share buyback tax will hurt Canada’s economy, including damaging the oil & gas sector that has been under siege since the Trudeau Liberals took power in 2015.

In a statement, the Canadian Association of Petroleum Producers said the proposed 2% tax rate on share buybacks could hurt investment:

“However, the industry is concerned about the proposed 2% tax rate proposed on share buy backs from publicly traded companies. The 2% tax rate is double than what is being considered in the United States and may have the unintended effect of discouraging investment into Canadian-run businesses while putting the shareholder returns of Canadian investors at risk.”

The CEO of Enerplus called it ‘tragic’:

“It’s truly tragic. The way forward (and there is a way forward – even though there are no quick fixes) should be based upon serious energy policy focused on things that will help encourage investment and increase supply – i.e. stable and well understood regulatory approval processes would be a good start. But higher taxes? Higher taxes have never been a path to increasing the supply of anything,” he said in an email.

“It’s a pretty straight forward fact pattern. So am I thrilled? Nope. Will the world end? Nope. Will the tax help with the crisis we are in? Nope,” he added.

An endlessly flawed approach

Canada benefits massively from being neighbours with the United States and having such deep ties to the US.

However, that also heightens how competitive we must be.

If taxes and barriers to investment/growth are too high in Canada, people can simply invest in the United States.

That’s a key reason why policies like the carbon tax are so damaging, because it simply drives wealth and investment to the United States.

This can be seen in the rapid divergence between Canadian & American per capita GDP.

Measured in US Dollars, Canada had a per capita GDP of $43,596 in 2015. US per capita GDP in that year was $56,762.

Now, Canada’s per capita GDP is $52,051, while US per capita GDP is $69,287.

We were about $13,000 behind, now we are $17,000 behind.

And the gap keeps growing. Canada’s economy is also more dependent on a distorted housing market and a private job market that has been shockingly weak, with over 80% of jobs created since the pandemic being public sector jobs.

The self-employment sector is still about 200,000 people smaller than it was in 2019.

So, we are seeing that the Liberals continue to weaken the Canadian economy, and everything they do simply doubles down and adds to the damage.

Spencer Fernando


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