(Deputy Prime Minister Freeland, who will table Budget 2023 on March 28, 2023)
Budget 2023 and American Competition
With Budget 2023 a day away, new information on what we can expect on the economic front has come forward. With a potential recession on the horizon in Canada, the federal government is looking to bolster spending in key growth sectors of the economy while keeping fiscal prudency not to fuel inflation further.
Canada's inflation has dropped from 8.1% in the summer of last year to 5.2% as of February 2023. Fortunately, the Bank of Canada estimates that inflation will fall to 3% by mid-year 2023 and back down to 2% by 2024.
For the federal government, Budget 2023 will provide a break to Canadians who are especially hit hard by higher prices, particularly low-income Canadians. However, Deputy Prime Minister Freeland says the budget is not looking to help everyone; it will offer only targeted inflation relief measures for the most "vulnerable Canadians."
At the same time, Minister Freeland's budget will likely spend billions on attracting and developing clean energy generation, integrating Canada's electricity grid, and providing subsidies for companies to set up shop for green tech manufacturing.
As Canada secured Volkswagen's first North American EV battery gigafactory in Ontario last week, Canada is looking to compete against the US in a world where EVs are increasingly taking hold in the auto industry. Analysts speculate that the federal government secured this factory by confirming billions of subsidies for Volkswagen to set up in Canada.
Government Incentives in the Green Tech Sector
A recent Reuters report has indicated that Canada will introduce a “30% investment tax credit to boost clean-tech manufacturing, especially in the electric vehicle (EV) supply chain.” Reuters reports that this tax credit will be used for manufacturing equipment for extracting and processing minerals for EVs, equipment used to produce nuclear energy fuels, making electrical energy storage, and producing solar panels or wind turbines.
For Canada's electricity grid, Canada already generates 87% of its electricity from clean with a mixture of hydro, nuclear, and wind. In order to get to 100%, the federal government needs to play a role in incentivizing provinces (especially the oil-rich province of Alberta) to transition to cleaner energy. In addition, integrating provincial energy grids to share power better with one another will also be key to incentivizing mass production of clean energy at a nationwide scale.
According to CTVnews, an investment tax credit will also be introduced. This investment tax credit will provide up to 40% of the capital cost for producing low-emission hydrogen. The lower the emissions, the higher the credit. This credit will also be exclusively tied to wages paid to workers and apprenticeships created by the company.
Other tax credits in Budget 2023 are also expected.
Canada is also looking to invest $250 million over five years in worker training programs to take on the jobs required in the clean technology sector. This includes supporting union-based apprenticeships and government portals to help workers find the most applicable programs.
Taxes and Corporate Crackdown
As the government is footing the bill for many of these initiatives, one can also expect tax increases to offset the increase in spending. As the budget approaches, business leaders in Canada speculate that a capital gains tax hike, taxes on oil company windfalls, and an increase in income taxes for high-income earners may be coming.
Moreover, the federal government has recently tabled legislation to create a 'corporate beneficial ownership registry.' A public registry would allow easier identification of who owns and controls corporations. In addition, the government is looking to identify corporations that launder money, commit financial crimes, and evade taxes in the country. With this, the government is looking to save costs on agencies tasked with identifying financial crimes and increase revenues from corporations who've evaded taxes.
Share This Post On
Leave a comment
You need to login to leave a comment. Log-in