We analyze the 2022 Fall Economic Statement and summarize the measures that may affect Canadians and their families.
November 3, 2022
By RBC Family Office Services
Deputy Prime Minister and Minister of Finance, Chrystia Freeland, released the Fall Economic Statement on Nov. 3, 2022. Amidst inflation and with a looming recession, it comes as no surprise that this update continues with the main themes from Budget 2022. This includes making life more affordable for the most vulnerable Canadians, supporting small businesses, jobs, growth and the economy.
The following is a summary of the most significant tax and financial planning measures announced in the Fall Economic Statement.
The GST credit is a tax-free quarterly payment that helps low- and modest-income individuals and families offset the GST they pay. The government has announced that these credits will double for the next six months. Current GST recipients will receive the support automatically.
In Sept. 2022, the government introduced legislation to implement the Canada Dental Benefit. This benefit will provide direct up-front tax-free payments to parents or guardians to cover dental expenses for their children under age 12. Canadian families with no dental coverage and with an annual family income under $90,000 per year will be eligible to receive payments totaling up to $1,300 per child over the next two years.
The COVID-19 support measure that waived interest on student loans is set to expire March 31, 2023. The government proposes to make all Canada Student Loans and Canada Apprentice Loans permanently interest-free, including those currently being repaid, beginning on April 1, 2023. The Repayment Assistance Plan will still be available to students to pause repayments while making less than $40,000 per year and reduce payments if earning slightly above that threshold.
The CWB is a refundable tax credit that supplements the income of low- and modest-income workers. Currently, the CWB is a credit claimed on your tax return. Those who qualify need to wait until the tax year is over to receive this support.
To provide CWB beneficiaries with more timely support throughout the year, the government proposes to automatically provide those who received the CWB for the previous tax year an entitlement for the current year through advance quarterly payments, based on their prior-year tax return. Any additional entitlement for the year, if any, will be provided when they file their current-year tax return. Advance payments will be issued automatically starting in July 2023 for the 2023 tax year.
The government is committed to making housing more affordable for Canadians. The government has reconfirmed its intention to:
The government is committed to negotiating with payment card networks, financial institutions, acquirers, payment processors and businesses to lower credit card transaction fees for small businesses, while not negatively impacting other businesses and protecting existing reward points for consumers. If the industry doesn’t come to an agreed solution, the draft legislative proposals to the Payment Card Networks Act that was released on Nov. 3, 2022, will be introduced in 2023 to ensure fees are reduced.
A share buyback occurs when a public corporation buys its own stock back from existing shareholders. Buying back shares is one legitimate option for public corporations to return value to their shareholders. However, the government recognizes this may result in corporate resources being diverted away from investments in Canadian workers and businesses.
As a result, the government intends to introduce a corporate-level two percent tax that would apply on the net value of all types of share buybacks by public corporations in Canada. The details of this new tax will be announced in Budget 2023, and the tax would come into force on Jan. 1, 2024.
The government proposes a refundable tax credit equal to 30 percent of the capital cost of investments in certain clean technologies when the companies adhere to certain labour conditions, while those that do not will only be eligible for a credit of 20 percent. There are currently some clean technologies that are eligible for this credit. Specific details on the labour conditions and any additional eligible technologies will be announced in Budget 2023. The credit would be available as of the day of Budget 2023 and no longer in effect at the start of 2035, subject to a phase-out starting in 2032.
The government is proceeding to establish a refundable investment tax credit to support investments in clean hydrogen production, as announced in Budget 2022. The credit will be available for eligible investments made as of the day of Budget 2023 and be phased out after 2030. The lowest carbon intensity tier that meets all eligibility requirements is proposed to receive an investment tax credit of at least 40 percent. If a company does not meet certain labour conditions, the maximum tax credit rate will be reduced by 10 percentage points.
The government confirmed their commitment to international tax reform with other members of the OECD by updating the two-pillar plan outlined in Budget 2022.
Pillar One is focused on reallocating taxation rights to market countries (i.e. where their users and customers are located). The government intends to complete the multilateral negotiations and prepare a treaty to be signed in the first half of 2023, with a view to it entering into force in 2024.
Pillar Two involves creating an effective minimum tax of 15 percent for multinational enterprises (MNEs). The government will continue to work with international partners to develop a framework to implement a global minimum tax on MNEs.
On Nov. 3, 2022, the government launched a consultation with stakeholders on digital currencies. The government acknowledges the need for Canada’s financial system to keep pace with the rise of digitalization of money. This is following the Budget 2022 announcement to launch a financial sector legislative review focused on the digitalization of money and maintaining financial sector stability and security.
The government proposes to make significant investments to improve the delivery of government services. This includes providing funds to Service Canada to process Employment Insurance (EI) and Old Age Security (OAS) claims faster, reduce the EI backlog and improve call centre wait times. The government also intends to provide funds to the Canada Revenue Agency (CRA) to enhance call centre operations.
The 2022 Fall Economic Statement confirms the government’s intention to proceed with previously announced legislative proposals. Some of these include, but are not limited to:
The 2022 Fall Economic Statement also reaffirms the government’s commitment to move forward as required with other technical amendments to improve the certainty and integrity of the tax system. This includes examining a new alternative minimum tax regime and to provide a detailed proposal and path for implementation that will be released in Budget 2023.
Prior to implementing any strategies, individuals should consult with a qualified tax advisor, legal professional or other applicable professional.
While it has been the long-standing practice of the CRA to allow taxpayers to file their tax returns based on proposed legislation, a taxpayer remains potentially liable for taxes under current law in the event that a proposal is not ultimately passed. Therefore, if proposed legislation does not become law, it is possible that the CRA may assess or re-assess your tax return based on existing legislation. It is recommended that you consult a professional tax advisor to assist you in assessing the costs and benefits of proceeding with specific proposals as they relate to you.
This document has been prepared for use by the RBC Wealth Management member companies, RBC Dominion Securities Inc. (RBC DS)*, RBC Phillips, Hager & North Investment Counsel Inc. (RBC PH&N IC), RBC Global Asset Management Inc. (RBC GAM), Royal Trust Corporation of Canada and The Royal Trust Company (collectively, the “Companies”) and their affiliates, RBC Direct Investing Inc. (RBC DI) *, RBC Wealth Management Financial Services Inc. (RBC WMFS) and Royal Mutual Funds Inc. (RMFI). *Member-Canadian Investor Protection Fund. Each of the Companies, their affiliates and the Royal Bank of Canada are separate corporate entities which are affiliated. “RBC advisor” refers to Private Bankers who are employees of Royal Bank of Canada and mutual fund representatives of RMFI, Investment Counsellors who are employees of RBC PH&N IC, Senior Trust Advisors and Trust Officers who are employees of The Royal Trust Company or Royal Trust Corporation of Canada, or Investment Advisors who are employees of RBC DS. In Quebec, financial planning services are provided by RMFI or RBC WMFS and each is licensed as a financial services firm in that province. In the rest of Canada, financial planning services are available through RMFI, Royal Trust Corporation of Canada, The Royal Trust Company, or RBC DS. Estate and trust services are provided by Royal Trust Corporation of Canada and The Royal Trust Company. If specific products or services are not offered by one of the Companies or RMFI, clients may request a referral to another RBC partner. Insurance products are offered through RBC Wealth Management Financial Services Inc., a subsidiary of RBC Dominion Securities Inc. When providing life insurance products in all provinces except Quebec, Investment Advisors are acting as Insurance Representatives of RBC Wealth Management Financial Services Inc. In Quebec, Investment Advisors are acting as Financial Security Advisors of RBC Wealth Management Financial Services Inc. RBC Wealth Management Financial Services Inc. is licensed as a financial services firm in the province of Quebec. The strategies, advice and technical content in this publication are provided for the general guidance and benefit of our clients, based on information believed to be accurate and complete, but we cannot guarantee its accuracy or completeness. This publication is not intended as nor does it constitute tax or legal advice. Readers should consult a qualified legal, tax or other professional advisor when planning to implement a strategy. This will ensure that their individual circumstances have been considered properly and that action is taken on the latest available information. Interest rates, market conditions, tax rules, and other investment factors are subject to change. This information is not investment advice and should only be used in conjunction with a discussion with your RBC advisor. None of the Companies, RMFI, RBC WMFS, RBC DI, Royal Bank of Canada or any of its affiliates or any other person accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. ®/TM Registered trademarks of Royal Bank of Canada. Used under licence. © 2022 Royal Bank of Canada. All rights reserved.
In Quebec, financial planning services are provided by RBC Wealth Management Financial Services Inc. which is licensed as a financial services firm in that province. In the rest of Canada, financial planning services are available through RBC Dominion Securities Inc.
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