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Archived - Chapter 6:
Effective Government and a Fair Tax System

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Millions of Canadians depend on government services every day. Whether they are renewing passports or receiving important benefits, Canadians rightly expect these services to be efficient and effective.

The federal government is continuing to invest in improving the services that Canadians count on and is taking new steps in Budget 2023 to ensure that government spending is sustainable, efficient, and focused on the priorities that matter most to Canadians.

Budget 2023 also introduces new measures to ensure that the wealthiest pay their fair share of tax, and that our tax system is one in which everyone plays by the same set of rules.

Key Ongoing Actions

Recent investments to improve services for Canadians include:

Previous measures to ensure a fair tax system include:

6.1 Effective Government

The efficient use of Canadians' tax dollars is essential to delivering on the priorities that matter most to Canadians. Budget 2023 delivers a refocusing of government spending to continue to serve Canadians most effectively.

Refocusing Government Spending to Deliver for Canadians

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From the creation of the Canada Child Benefit, to infrastructure investments in our communities, to supporting Canadians through the pandemic, the federal government has proudly invested in Canadians and the Canadian economy since 2015.

These investments have lifted millions of Canadians out of poverty, built more vibrant communities across the country, grown our economy, and helped weather a once-in-a-century pandemic. Ensuring the federal government can continue to invest in Canadians for years to come is essential.

After two years of emergency pandemic spending, the government committed in Budget 2022 to begin normalizing the overall level of program spending, and announced that the government would examine previous spending plans with a view to reducing COVID-19-related spending by up to $3 billion over four years.

In the 2022 Fall Economic Statement, the government delivered on this commitment with reduced spending of $3.8 billion, owing to lower-than-expected need for COVID-19 supports in 2021-22.

Moving forward, Budget 2023 will continue these efforts to bring the pace and scale of the growth of government spending back to a pre-pandemic path, in order to ensure that Canadians' tax dollars are being used efficiently and being invested in the priorities that matter most to them.

Further savings in Budget 2023 will meet the commitments laid out in last year's Budget—and will help pay for the strengthening of Canada's public health care system, the delivery of the Canadian Dental Care Plan, and the building of Canada's clean economy.

In total, these proposals represent savings of $15.4 billion over the next five years.

Realigning Previously Announced Spending

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As part of the government's commitment to responsibly manage Canadians' tax dollars, it is also continuing to assess the pace and scale of previously announced spending that has yet to occur. Where implementation is slower than originally planned, when take-up is lower, or when circumstances have changed, it makes sense to ensure government resources are still allocated to their best purpose.

Effective Government Programs

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The regular review of government programs is important if they are to deliver their intended results for Canadians.

6.2 Improving Services for Canadians

Budget 2023 proposes new investments to ensure Canadians can count on fast and effective services from the federal government, and receive the benefits they are entitled to in a timely manner.

Protecting Passenger Rights

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When Canadians travel by air, their experience should be safe, dependable, and respectful of their rights. The Canadian Transportation Agency is responsible for ensuring Canada's transportation systems run smoothly and efficiently, for protecting consumers, and for holding airlines accountable.

In Budget 2023, the federal government is proposing new steps to strengthen the Canadian Transportation Agency, make airlines more accountable, and ensure that passengers are fairly compensated for delays and cancellations.

These measures build on the government's March 14, 2023, announcement of $75.9 million over three years, starting in 2023-24, to ensure the Canadian Transportation Agency has the resources for enforcement and compliance, and to provide dispute resolution services to Canadians and businesses when they are unable to resolve issues directly with air, rail, or marine service providers. 

Improving Airport Operations and Passenger Screening

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Airlines and airports around the world were hit hard by the pandemic, and those in Canada were no exception. As air travel returned through 2022, Canadians faced unacceptable flight delays, long lineups at airports, and mishandled baggage.

While delays have been reduced in recent months, the federal government is acting to strengthen air passenger rights and improve Canadians' experiences at the airport.

Faster Passport Processing and Improved Immigration Services

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Canadians are eager to travel abroad again, and people from around the world continue to want to come to Canada to work, study, and build their lives. Whether someone is renewing their passport, immigrating to Canada, or reuniting with their family, everyone should be able to count on fast and efficient service.

Last year, as the world opened up and people began to travel, too many Canadians and newcomers were forced to deal with unacceptable wait times. To address this, the federal government has adopted new technologies, streamlined processing, and made significant new investments, including $135 million in 2022-23 to address immigration application backlogs. This has resulted in:

Faster Services for Veterans

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Those who served Canada with our flag on their shoulder deserve to receive benefits and services in a timely manner.

Since 2015, the federal government has invested more than $11 billion to enhance benefits and services for veterans, and applications for benefits have increased by 47 per cent. After significant staff reductions were made at Veterans Affairs Canada between 2009 and 2014, these cuts and the rise in applications after 2015 led to unacceptable wait times for too many veterans.

While the government has reduced backlogs by more than 60 per cent since 2020 by hiring 350 staff and speeding up processing, there is still more work to do.

Improving Canada.ca and 1 800 O-Canada

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All Canadians should have quick and easy access to information on government programs and services—whether they are a senior who prefers to call, a person with a disability who requires a more accessible website, or someone who prefers to look for information on their phone. After a sharp rise in inquiries during the pandemic, requests for information through Canada.ca and 1 800 O-Canada (622-6232) remain at nearly double their pre-pandemic levels.

Old Age Security IT Modernization

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The federal government delivers more than $60 billion in Old Age Security benefits to more than seven million seniors each year. To ensure the timely and reliable delivery of these critical benefits, the Old Age Security IT system must be updated.

Ensuring the Integrity of Emergency COVID-19 Benefits

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When COVID-19 hit, the federal government responded by providing emergency income supports to close to nine million Canadians. This support was essential, and it helped Canadians weather a once-in-a-century pandemic.

To minimize delays and ensure that Canadians received the support they needed, benefits arrived quickly. Inevitably, this led to overpayments and, in some cases, abuse of the system. In Budget 2023, the government is taking further action to ensure the integrity of Canada's emergency benefit system.

The federal government is committed to working with Canadians to recover overpayments. Those struggling with the repayment process are able to work with Canada Revenue Agency to develop a flexible repayment plan that works with their individual life circumstance.

Renewing Equalization and Territorial Formula Financing

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Equalization and Territorial Formula Financing programs enable all provincial and territorial governments to provide comparable services to Canadians.

6.3. A Fair Tax System

Programs and services that Canadians rely on—including Old Age Security, the Canada Child Benefit, Early Learning and Child Care, and transfers to provinces in support of health care and education—are dependent on a robust national tax base.

Budget 2023 builds on progress the federal government has made since 2015 to close loopholes, crack down on tax avoidance, and ensure that the wealthiest pay their fair share.

Ensuring the Wealthiest Canadians Pay Their Fair Share

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Through the significant use of deductions, credits, and other tax preferences, some of the wealthiest Canadians pay little to no personal income tax in a given year.

The AMT is intended to ensure that the highest-income Canadians cannot disproportionately lower their tax bill through advantages in the tax system. The AMT has not been significantly reformed since its implementation in 1986, and thousands of the wealthiest Canadians still pay very little income tax.

Under these reforms, more than 99 per cent of the AMT paid by individual Canadians would be paid by those who earn more than $300,000 per year, and about 80 per cent of the AMT paid would be by those who earn more than $1 million per year.

International Tax Reform

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Canada is committed to ending the corporate tax race to the bottom and ensuring that multinational corporations pay their fair share of tax wherever they do business. This is about putting Canadian workers and businesses on a level playing field with our global competitors.

Canada continues to strongly support the two-pillar international tax reform plan agreed by 138 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

Pillar One (Reallocation of Taxing Rights)

Pillar One will ensure that the largest and most profitable global corporations, including large digital corporations, pay their fair share of tax in the jurisdictions where their users and customers are located. Canada and our international partners have been developing the rules of this innovative new system through an OECD-led process, and countries are working towards completing multilateral negotiations so that the treaty to implement Pillar One can be signed by mid-2023.

To ensure that Canadians' interests are protected in any circumstance, the federal government will continue to advance legislation for a Digital Services Tax. It is Canada's hope and expectation that the timely implementation of the new multilateral system will make a Digital Services Tax unnecessary.

Pillar Two (Global Minimum Tax)

Pillar Two, a global minimum tax regime, will ensure that large multinational corporations are subject to a minimum effective tax rate of 15 per cent on their profits wherever they do business.

To function effectively, Pillar Two requires coordinated implementation by countries around the world. Recent steps taken by a number of countries to implement Pillar Two in 2024, including the members of the European Union, the United Kingdom, Japan, and the Republic of Korea, mean the multilateral framework for the global minimum tax regime is now being put in place.

A Tax on Share Buybacks

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The 2022 Fall Economic Statement announced the federal government's intention to introduce a two per cent tax on share buybacks by public corporations in Canada, with details to follow in Budget 2023.

It is estimated that this measure would increase federal revenues by $2.5 billion over five years, starting in 2023-24. Importantly, this would also encourage firms to re-invest in their workers and businesses.

Fair Taxation of Dividends Received by Financial Institutions

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Currently, the dividends that financial institutions receive on Canadian shares are not treated as business income and are effectively exempt from tax. Financial institutions rely on this treatment to lower their tax burden, which reduces tax revenues that are important to delivering benefits and services to Canadians.

This measure would apply to dividends received after 2023, which would increase federal revenues by $3.15 billion over five years starting in 2024-25, and by $790 million ongoing. 

Strengthening the General Anti-Avoidance Rule

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The General Anti-Avoidance Rule (GAAR) was added to the Income Tax Act in 1988 to prevent abusive tax avoidance. If abusive tax avoidance is established, the GAAR applies to deny the tax benefit that was unfairly created. The GAAR has helped to tackle abusive tax avoidance but it requires modernizing to ensure its continued effectiveness.

Chapter 6
Effective Government and a Fair Tax System
millions of dollars
  2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2027-2028 Total
6.1. Effective Government -160 -3,950 -1,231 -1,411 -3,101 -2,901 -12,754
Refocusing Government Spending – Reduced Spending on Consulting, Professional Services and Travel 0 -500 -1,650 -1,650 -1,650 -1,650 -7,100
Refocusing Government Spending – Reduced Eligible Spending by Government Departments and Agencies 0 0 -681 -1,424 -2,441 -2,441 -6,987
Refocusing Government Spending – Crown Corporation – Comparable Spending Reductions 0 0 -126 -262 -450 -450 -1,288
Less: Budget 2022 Commitment
0 0 1,000 2,000 3,000 3,000 9,000
Realigning Previously Announced Spending -160 -3,450 225 -75 -1,560 -1,360 -6,380
6.2. Improving Services for Canadians 54 529 733 732 49 44 2,141
Protecting Passenger Rights1 0 22 27 26 0 0 76
Improving Airport Operations and Passenger Screening 0 475 644 653 2 2 1,775
Less: Funds Sourced From Existing Departmental Resources
0 -10 -10 -10 0 0 -31
Faster Services for Veterans 0 24 38 41 28 26 157
Improving Canada.ca and 1 800 O-Canada 0 6 5 4 2 0 18
Old Age Security IT Modernization 0 11 30 18 17 17 93
Ensuring the Integrity of Emergency COVID-19 Benefits 54 0 0 0 0 0 54
6.3. A Fair Tax System 0 -155 -1,455 -1,615 -4,360 -4,000 -11,585
Ensuring the Wealthiest Canadians Pay Their Fair Share 0 -150 -625 -695 -735 -745 -2,950
International Tax Reform – Pillar Two (Global Minimum Tax) 0 0 0 0 -2,765 -2,365 -5,130
A Tax on Share Buybacks 0 -35 -515 -605 -640 -680 -2,475
Less: Funds Previously Provisioned in the Fiscal Framework
0 30 440 520 550 580 2,120
Fair Taxation of Dividends Received by Financial Institutions 0 0 -895 -980 -920 -940 -3,735
Less: Funds Previously Provisioned in the Fiscal Framework
0 0 140 145 150 150 585
Additional Investments – Effective Government and a Fair Tax System 9 662 423 -148 103 -303 746
2026 Census of Population View the impact assessment 0 72 82 185 481 102 923
Less: Funds Sourced From Existing Departmental Resources
0 0 0 -23 -23 -23 -68
Funding proposed for StatCan for the 2026 Census of Population.
2026 Census of Agriculture View the impact assessment 0 9 11 11 17 9 57
Funding proposed for StatCan for the 2026 Census of Agriculture.
Increasing the Air Travellers Security Charge (ATSC) 0 0 -279 -313 -323 -333 -1,248
Budget 2023 proposes to increase ATSC rates, which will support the financing of air security costs.
Laboratories Canada Program Operations View the impact assessment 0 30 30 0 0 0 59
Funding proposed for PSPC to manage the renewal of key federal science and technology infrastructure as part of the Laboratories Canada program.
Supporting the Government's Transition to Cloud View the impact assessment 0 3 3 0 0 0 6
Funding proposed to TBS to guide departments on the transition to cloud technology.
Office of the Commissioner of Lobbying of Canada View the impact assessment 0 0 0 0 0 0 2
Funding proposed for the OCL to continue to fulfill its mandate.
Maintaining Capacity for the Canadian Intergovernmental Conference Secretariat View the impact assessment 0 2 2 2 0 0 5
Less: Costs to be Recovered
0 0 0 0 0 0 -1
Funding proposed for CICS to continue to deliver on its mandate.
Improving Procurement Opportunities for Canadian Businesses View the impact assessment 0 22 29 29 0 0 80
Less: Funds Sourced From Existing Departmental Resources
0 -3 -3 -3 0 0 -9
Funding proposed for PSPC to maintain the government's electronic procurement platform.
Improving the Government's Pay Administration View the impact assessment 0 52 0 0 0 0 52
Funding proposed for TBS to ensure there is sufficient capacity to oversee human resources, pay, and pension matters. Funding proposed for SSC to continue work on a potential next-generation pay solution.
Improving Technical Support to Access Online Services View the impact assessment 0 16 14 0 0 0 30
Funding proposed for ESDC to maintain service levels at the Registration and Authentication Call Centre, which provides support to Canadians having technical challenges with their My Service Canada Account.
Ensuring Timely Delivery of Social Insurance Numbers View the impact assessment 0 6 5 0 0 0 12
Funding proposed for ESDC to maintain Social Insurance Number-related services, including call centre and processing capacity.
Improved Information Sharing About Deceased Beneficiaries View the impact assessment 0 5 5 0 0 0 10
Less: Funds Sourced From Existing Departmental Resources
0 0 0 0 0 0 -1
Funding proposed for ESDC to help provinces improve their death information sharing processes and to address barriers to timely death notification processing within the federal government.
Protecting the Privacy of Canadians View the impact assessment 0 5 7 4 3 2 21
Less: Funds Sourced From Existing Departmental Resources
0 -2 -4 -4 -3 -2 -15
Funding proposed for the OPC to undertake more in-depth investigations of privacy breaches across public and private organizations, to improve response rates to privacy complaints from Canadians and operationalize new processes required to implement the Consumer Privacy Protection Act.
Developing a Tobacco Cost Recovery Framework View the impact assessment 0 2 2 2 0 0 7
Less: Funds Sourced From Existing Departmental Resources
0 -2 -2 -2 0 0 -7
Funding for HC to develop a cost recovery framework that would require tobacco manufacturers to contribute to the cost of federal public health investments in tobacco control.
FINTRAC Funding View the impact assessment -2 -3 -4 -6 -6 -5 -27
Proposed adjustments to FINTRAC appropriations due to a cancelled headquarters relocation.
Defending the Canadian Softwood Lumber Industry View the impact assessment 0 26 26 0 0 0 51
Funding proposed for GAC to continue supporting the Canadian response to U.S. softwood lumber duties and efforts towards a softwood lumber agreement.
Creative Export Strategy (Trade Promotion) View the impact assessment 0 2 2 0 0 0 5
Funding proposed for GAC to continue trade promotion activities under the Creative Export Strategy.
Renewing Pay System Resources View the impact assessment 0 517 521 0 0 0 1,038
Funding proposed for PSPC to maintain pay system resources as the government continues its work to resolve public service pay issues.
GAC Adjustments for Non-Discretionary Cost Fluctuations 11 26 27 26 26 26 141
Funding proposed for GAC to compensate for non-discretionary cost increases, such as changes in exchange rates and inflation, which affect missions abroad.
GST/HST Treatment of Payment Card Clearing Services View the impact assessment 0 -195 0 0 0 0 -195
Budget 2023 proposes to amend the Goods and Services Tax/Harmonized Sales Tax (GST/HST) definition of "financial service" to clarify that payment card clearing services rendered by a payment card network operator are not included in the definition.
Strengthening the Intergenerational Business Transfer Framework View the impact assessment 0 -50 -215 -225 -245 -260 -995
Budget 2023 announces the government's intention to release for consultation draft legislative amendments to facilitate genuine intergenerational business transfers while protecting the integrity of the tax system.
Retirement Compensation Arrangements View the impact assessment 0 23 60 60 60 60 263
Budget 2023 proposes that the CRA make refunds to certain retirement compensation arrangements for previously remitted refundable taxes related to premiums for securing retirement benefits via a letter of credit, and to exempt those premiums from refundable tax going forward.
Alcohol Excise Duty View the impact assessment 0 100 105 110 115 120 550
Alcohol excise duties are automatically indexed to CPI inflation at the start of each fiscal year. This proposal temporarily caps the inflation adjustment for excise duties on all alcoholic products at 2 per cent for one year only as of April 1, 2023.
Chapter 6 – Net Fiscal Impact -97 -2,914 -1,529 -2,441 -7,310 -7,160 -21,452

Note: Numbers may not add due to rounding. A glossary of abbreviations used in this table can be found at the end of Annex 1.

1 Announced March 14, 2023.

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