Ottawa to introduce 2% tax on stock buybacks starting in 2024
Ottawa to introduce 2% tax on stock buybacks starting in 2024
Government to levy extra tax when companies buy back their own shares
Pete Evans · CBC News · Posted: Nov 03, 2022 4:40 PM ET | Last Updated: 4 hours ago
https://www.cbc.ca/news/business/ottawa-stock-buyback-tax-1.6639713
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The federal government wants Canadian companies to spend more of their own money to invest in their businesses and help grow the economy, so it's bringing in a new tax on corporations when they use their profits to do nothing more than pad their bottom lines.
In the Fall Economic Statement released Thursday, the government announced it plans to implement a new tax of two per cent on stock buybacks.
As the name implies, buybacks are when publicly traded companies buy back a portion of their own shares on the stock market, at market prices.
Buybacks do nothing to improve or expand a company's underlying business, but they have the effect of driving up share prices and improving various profitability metrics by reducing the amount of shares in the company. Investors tend to welcome them for those benefits, but in recent years the sheer volume of stock buybacks has started to raise concerns.
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