Chapter 4
Effective Government, a Fair Tax System, and a Stable Financial Sector

Canada has a proud tradition of stable institutions and responsible fiscal management. Continuing this tradition is essential for the government to continue supporting Canadians and deliver on their priorities. The 2023 Fall Economic Statement takes further action to ensure that Canadians' resources are being used as efficiently and effectively as possible, and to continue building a tax system where everyone pays their fair share. The Fall Economic Statementalso takes steps to strengthen Canada's financial sector and protect Canadians against financial crimes.

4.1 Effective, Efficient Government

As part of the federal government's economic plan, Budget 2023 introduced a plan to identify $15.4 billion in savings that are being refocused towards the priorities that matter most to Canadians today. These savings are currently being delivered without affecting direct benefits and service delivery to Canadians; direct transfers to other orders of government and Indigenous communities; or the Canadian Armed Forces. Building on this work, the 2023 Fall Economic Statement announces new measures to ensure Canadians' resources are being used efficiently and effectively.

Responsible Government Spending

In Budget 2023, the federal government made decisions to find savings which would help to pay for important services and programs for Canadians. By requiring departments and agencies to reduce spending by 3 per cent, in addition to reducing spending on consulting and professional services, the government was able to make investments to strengthen Canada's public health care plan, deliver the Canadian Dental Care Plan, and make transformative investments in Canada's future economy.

The government will be delivering additional public service spending reduction targets in 2025-26 and beyond.

• The 2023 Fall Economic Statement announces that the government will extend and expand its Budget 2023 efforts to refocus government spending, with departments and agencies generating additional savings of $345.6 million in 2025-26, and $691 million ongoing. Combined with the $15.4 billion in refocused spending outlined in Budget 2023, the government will be saving $4.8 billion per year in 2026-27 and ongoing and returning the public service closer to its pre-pandemic growth track.

Responsible Investments to Meet the Current Needs of Canadians

The federal government takes seriously its responsibility to ensure that Canadians' resources are being used efficiently and invested in the priorities that matter most to Canadians. When program implementation is slower than originally planned, when take-up is lower, or when circumstances have changed, it is important to reallocate federal investments towards more timely priorities. Following similar measures in Budget 2023, this Fall Economic Statement takes additional steps to reallocate previously announced investment that has yet to occur.

• The 2023 Fall Economic Statement proposes to further reduce previously announced investment that remains unallocated or is no longer required, or to delay it where the pace of implementation is slower than originally envisioned. This will result in savings of $480 million over six years, starting in 2023-24.

Further updates on the government's efforts in Budget 2023 and the 2023 Fall Economic Statement to realign previously announced investments will be available in the Estimates and Departmental Plans over the course of the 2023-24 fiscal year.

Protecting Public Interest in Cases of Public Post-Secondary Educational Institutions Insolvency

By educating our young people and conducting world-leading research, public post-secondary educational institutions play a critical role in Canada's social, scientific, and economic development. Following the unprecedented financial crisis and restructuring at Laurentian University in 2021, Canadians have raised concerns about the appropriate protection of important programs and services in the event of a publicly funded post-secondary educational institution becoming insolvent.

Since then, Innovation, Science, and Economic Development Canada has engaged with universities, students, faculty, and other stakeholders to explore how to best protect the public interest functions of these essential institutions in insolvency and restructuring situations.

• The 2023 Fall Economic Statement proposes that the government will amend federal insolvency laws, namely the Companies' Creditors Arrangement Act and the Bankruptcy and Insolvency Act, to exclude public post-secondary educational institutions from becoming the subject of proceedings under either Act.

These amendments will reduce the risk of negative consequences in possible corporate restructuring at public post-secondary educational institutions, such as reduced programming.

4.2 A Fair Tax System

The 2023 Fall Economic Statement takes action to ensure Canadians have access to strong and independent journalism, while also outlining Canada's next steps on international tax reform and digitalization. Additional information about tax measures in the 2023 Fall Economic Statement can be found in Tax Measures: Supplementary Information. 

International Tax Reform and Digitalization

Canada's essential social safety net depends on a robust tax system where those who do business in Canada pay their fair share.

Since 2017, Canada has actively participated in multilateral negotiations aimed at ending a global corporate tax race to the bottom and ensuring that all corporations pay their fair share. Canada strongly supports the two-pillar tax reform plan agreed to in 2021 by 138 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

It is Canada's intention to move ahead with legislation to implement the Pillar Two global minimum tax in Canada, which would ensure that large multinational corporations are subject to a minimum effective tax rate of 15 per cent on their profits wherever they do business.

Canada has worked diligently and constructively to negotiate a multilateral treaty to implement Pillar One, which would 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. 

In October 2021, the federal government agreed to pause the implementation of Canada's Digital Services Tax, which had been announced in 2020, until the end of 2023, in order to give time for negotiations on Pillar One to conclude. Meanwhile, at least seven other countries (Austria, France, India, Italy, Spain, Türkiye, and the United Kingdom) have continued to apply their own Digital Services Taxes.

Canada reaffirms its desire to see Pillar One implemented and will continue to work with our international partners to bring the new multilateral system into effect as soon as a critical mass of countries is willing.  

Until that time, and in order to protect Canada's national economic interest, the government intends to move ahead with its longstanding plan for legislation to enact a Digital Services Tax in Canada and ensure that businesses pay their fair share of taxes and that Canada is not at a disadvantage relative to other countries. Forthcoming legislation would allow the government to determine the entry-into-force date of the new Digital Services Tax, as Canada continues conversations with its international partners.

Supporting Journalists and News Organizations

Independent journalism makes our democracy stronger—and local journalism is essential to providing communities with the information they need from coast to coast to coast. However, the changing nature of the news industry is threatening the existence of local news across Canada.

• To ensure a strong and independent press can continue to thrive in Canada, the 2023 Fall Economic Statement proposes to enhance the Canadian journalism labour tax credit. Effective for labour costs incurred on or after January 1, 2023, the federal government proposes to increase the yearly limit on labour costs that can be claimed per eligible employee from $55,000 to $85,000, and temporarily increase the tax credit rate from 25 per cent to 35 per cent for a period of four years.

This measure would cost an estimated $129 million over five years, starting in 2024-25, with $10 million per year ongoing.

4.3 A Stable, Secure Financial Sector

The global financial system is facing new and significant challenges which are having an impact on the Canadian financial sector and the day-to-day lives of Canadians.

The 2023 Fall Economic Statement announces new measures to protect Canadians from evolving threats and to continue to safeguard the integrity of our financial system. The Fall Economic Statement also provides updates on important aspects of the government's plan to address challenges including national economic security, the digitalization of money and other realities of the 21st century financial system.

Combatting Financial Crimes

Terrorist financing, money laundering, and sanctions evasion are serious financial crimes. They pose real threats to the safety of Canadians and the integrity of our financial system and have real costs for the Canadian economy.

Since 2015, the federal government has introduced a series of legislative amendments to the Criminal Code and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to strengthen the investigative, enforcement, and information-sharing tools of Canada's Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime. The government also took steps in Budget 2023 to respond to the findings of the Government of British Columbia's final report of the Commission of Inquiry into Money Laundering in British Columbia, also known as the Cullen Commission. Building on this work, the 2023 Fall Economic Statement proposes new measures to further safeguard Canada against financial crimes.

• The 2023 Fall Economic Statement announces the government's intention to introduce legislative measures to continue strengthening Canada's AML/ATF Regime. Proposed changes to the PCMLTFA and its regulations would:
  • Combat sanctions evasion by permitting the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to use its expertise to develop intelligence products, and, where appropriate, disclose its findings to law enforcement partners in an effort to support law enforcement and Canada's sanction-based asset seizure and forfeiture regime;
  • Address fraud and money laundering risks in the real estate sector by extending requirements under the PCMLTFA to title insurers and by requiring real estate representatives to identify unrepresented parties and third parties in real estate transactions;
  • Broaden the PCMLTFA framework to apply to intermediary companies, known as "acquirers," offering cash withdrawal services for white-label automated teller machines;
  • Combat environmental crime by enabling FINTRAC to share financial intelligence with enforcement officers at Environment and Climate Change Canada and the Department of Fisheries and Oceans;
  • Improve FINTRAC's strategic intelligence products by allowing it to list names of foreign entities that present AML/ATF risks; and,
  • Make technical amendments to the PCMLTFA to address inconsistencies and close loopholes.

• To support the operational effectiveness of the AML/ATF Regime, proposed changes to the Criminal Code would:
  • Address challenges with prosecuting third-party money launderers by amending the money laundering offence;
  • Respond to the rapidly evolving nature of financial crime by adapting the production order for financial data so that it more effectively applies to accounts associated with digital assets; and,
  • Modernize provisions related to the search, seizure, and restraint of proceeds of crime.

• To build on investments made in Budget 2019 that protect the security of Canada's trade system, the 2023 Fall Economic Statement announces thegovernment's intent to introduce legislative amendments to enhance the authorities of the Canada Border Services Agency (CBSA), and intent to create a Trade Transparency Unit within the CBSA to detect, deter, and disrupt trade-based financial crime. 

Combatting Security Risks to Canada's Financial Sector

Addressing financial sector integrity and security risks, including threats from foreign interference, is important to ensuring Canadians have confidence in our financial institutions. The federal government is building on measures announced in Budget 2023 to modernize the federal framework and address emerging risks to Canada's financial sector:

• The Department of Finance is working with security and intelligence partners to implement the national security review process of payment service providers planned for 2024 under the Retail Payment Activities Act. Further to the expansion of its mandate in Budget 2023, the Office of the Superintendent of Financial Institutions (OSFI) released a draft Integrity and Security guideline for public consultation on October 13, 2023, and is engaging with industry before issuing the final guideline in January 2024.
• On October 5, 2023, the government launched consultations as part of its review of federally regulated financial institutions statutes. The review is seeking feedback by December 4, 2023 on technological and geopolitical changes which are affecting the financial sector, and whether changes are required to protect Canadians, national security, and the safety and integrity of Canada's financial sector.

If deemed necessary, the government will introduce further measures in Budget 2024.

Update on Protecting Canadians From the Risks of Crypto-Assets

Volatile crypto-assets and the digitalization of money pose risks to people and financial systems in Canada and around the world. Billions of dollars in value held in crypto-assets has been wiped out, eviscerating savings and retirements for people around the world. Federal and provincial regulators have been actively monitoring this space and participating in international discussions to ensure Canada's financial system and the financial well-being of Canadians are protected.

To protect Canadians' pensions, the federal government has been advancing measures announced in Budget 2023 to require disclosures of crypto-asset exposures from federally regulated pension plans. As most of Canada's largest pension plans are provincially regulated, the government is also engaging provinces in this ongoing work and encouraging them to protect Canadians' pensions by requiring these plans to disclose their crypto-asset risk. 

The Office of the Superintendent of Financial Institutions (OSFI) is expected to launch consultations with federally regulated financial institutions on the implementation of public disclosure of crypto-asset exposures in November, complementing work being done by the Basel Committee on Banking Supervision and the Financial Stability Board. The government has also completed targeted consultations with stakeholders to better understand how digital assets are evolving and their potential implications.

The government will continue to take action to protect Canadians and their savings.