Canada Proposes New Tax On Share Buybacks

The federal government's 2022 Fall Economic Statement (Economic Statement), released on November 3, 2022, introduced a new tax on share buybacks by public corporations in Canada. Under the proposal, which would come into force on January 1, 2024, a two percent corporate-level tax would apply on the "net value" of a corporation's share buybacks. Share buyback programs are a means of returning value to shareholders and are initiated by companies for a variety of reasons. Particularly for companies who believe their stock is undervalued, the repurchase and cancellation of shares reduces supply, increases demand and can result in an increased share price.

There are few details available on the proposed tax, pending the 2023 federal budget. The government does state that the tax will be ". similar to a recent measure introduced in the United States". In August 2022, President Joe Biden signed the Inflation Reduction Act into law, which included a one percent tax on the