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Liberals to propose corporate stock buyback tax in fall economic statement: source

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OTTAWA — A senior government official says Finance Minister Chrystia Freeland’s fall economic statement will propose to tax corporate stock buybacks in a bid to encourage companies to invest in their domestic operations and workers.

The source spoke to The Canadian Press on the condition they not be named because they were not authorized to discuss the contents of the fiscal update publicly.

Thursday’s fiscal update is widely expected to include Canada’s response to U.S. President Joe Biden’s Inflation Reduction Act, which also included a one-per-cent tax on corporate stock buybacks.

Environment Minister Steven Guilbeault lashed out at oil companies last week for making very limited investments in climate action even as massive profits driven by inflation allowed them to pad the wallets of shareholders.

Oil giant Cenovus announced third-quarter profits today of $1.6 billion, 192 per cent higher than the same quarter a year ago.

The company also delivered $659 million to shareholders through share buybacks during the quarter.

The fall economic statement is also expected to focus on driving investment to Canada’s clean energy industries in response to new American tax incentives.

The government is expected to use the update as an attempt to signal its fiscal responsibility as inflation runs high and a potential recession looms.

Freeland haswarned that the government will not be able to compensate all Canadians for the rising cost of living.

While speaking in Windsor, Ont., last month, Freeland said the fiscal update will focus on the economy Canada is trying to “seize” for the future — one that is heavily focused on clean power, electric vehicles, battery manufacturing and critical minerals.

Federal party leaders have used the upcoming fall economic statement as an opportunity to push for their priorities.

In a letter addressed to Freeland on Sunday, Conservative Leader Pierre Poilievre urged the government not to introduce any new taxes and to refrain from imposing new spending without making commensurate budget cuts.

For his part, NDP Leader Jagmeet Singh wrote a letter calling on Prime Minister Justin Trudeau to address “corporate greed” and immediately reform the employment insurance program.

As fears of a potential recession grow, interest groups have also laid out their demands.

In a news release, the Canadian Chamber of Commerce said “as a growing number of experts predict a slowdown in Canada’s economy, it’s important for the government to use the fall economic statement to set out a clear strategy for growth.”

The group said it would like to see the federal government help address labour shortages while reforming regulations and avoiding new taxes.

The Bank of Canada’s aggressive interest rate hikes have also sparked concern among labour groups about what an economic slowdown will mean for employment.

In a press release about the fall economic statement, the National Council of Unemployed Workers is calling on the federal government to include EI reforms in the update.

“We should not wait for the next crisis to fix the social safety net,” a spokesperson for the organization said in a statement.

This report by The Canadian Press was first published Nov. 2, 2022.

Nojoud Al Mallees, The Canadian Press

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Share debacle a rare setback for Indian tycoon Adani

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By Krutika Pathi in New Delhi

NEW DELHI (AP) — Indian billionaire Gautam Adani grinned as he posed this week for photos with Israeli leader Benjamin Netanyahu after acquiring one of the country’s main ports, in Haifa.

“I promise you that in the years to come, we will transform the skyline we see around us,” said Adani, his manner upbeat even as his business empire was losing billions. Investors have been dumping Adani shares for more than a week after U.S. short-selling firm Hindenburg Research put out a report alleging his businesses have engaged in fraud and stock price manipulation. The Adani group has denied this.

Before the debacle, Adani, 60, was Asia’s richest man and the third wealthiest in the world, according to Bloomberg’s Billionaires Index. Not anymore.

The massive losses are a rare setback for the coal mining tycoon from western India’s Gujarat state and raise questions about what lies ahead.

Expansion has been at the heart of Adani’s success story. The son of a middle-class family in the Gujarat capital, Ahmedabad, he quit college to become a diamond trader in the country’s financial capital, Mumbai. He returned home to join his brother in importing plastics before establishing Adani Enterprises in the 1980s, trading in everything from shoes to buckets.

Adani shifted to investing in ports, construction and coal mining as India opened up its economy in the 1990s. A new middle class emerged and the ambitious businessman placed bets on providing energy to serve them.

Adani’s first big project, Mundra Port, is now India’s largest commercial port and he is the country’s biggest private port operator. Within a decade, he also became India’s largest developer and operator of coal mines.

Today, Adani companies also operate airports in major cities, build roads, generate electricity, manufacture defense equipment, develop agricultural drones, sell cooking oil and run a media outlet. He has his eyes set on becoming the world’s largest renewable energy player by 2030.

Citing market volatility, late Wednesday his flagship Adani Enterprises scrapped a $2.5 billion share offering that, despite the bloodletting in the group’s shares and a 28% plunge that day in its own share price, had been oversubscribed.

In a video address Thursday, Adani said the share offering was canceled to “insulate investors from potential losses.”

“For me, the interest of my investors is paramount and everything else is secondary,” he said.

The share offering was seen as a test of investor confidence in the self-made industrialist, whose ascent has been celebrated as a symbol of India’s economic ambitions. The Adani Group said in a statement that canceling the offering would not “have any impact on our existing operations and future plans.”

The Adani Group said its balance sheet was “very healthy” and its history of servicing debt was “impeccable.”

Still, Brian Freitas, a New Zealand-based analyst with Periscope Analytics who has researched the Adani Group, said the collapse in share prices for India’s second-largest conglomerate may hinder its future plans for expansion.

“It’s going to be difficult for them to raise new money,” he said.

Adani shares are still losing value. Shares in Adani Enterprises tumbled 27% Thursday, while stock in six other Adani companies fell 5%-10%.

The tycoon, who favors a plain white shirt and dark trousers over fancy dress and is said to be affable and quiet spoken, slid from being the world’s third richest man to the 13th as his fortune sank to $72 billion, according to Bloomberg’s Billionaire Index. Prior to the Hindenburg report, his net worth was about $120 billion.

More vitally, the company is now without the funds it had hoped to raise in this week’s offering. Companies often launch such share offerings to finance growth while reducing debt.

“Thanks to the short-seller, Adani’s plans will get slowed down significantly,” said R.N. Bhaskar, a journalist who wrote a biography on Adani.

Analysts say that rapid expansion has largely been fueled by borrowing. The group’s debt stands at $30 billion, out of which $9 billion is from Indian banks, the group’s chief financial officer said recently.

After the stock rout of the past week, lenders may deem his group high risk and toughen their criteria for borrowing, like demanding higher interest rates or more collateral, said Freitas.

“Equity investors are going to be wary because the stock isn’t doing well — if they can’t raise equity, they will have to go to the debt market,” he added. “Given the situation, foreign lenders will think twice before lending any new money to Adani.”

Despite Adani’s longstanding ties with Prime Minister Narendra Modi, a fellow Gujarati, and other powerful politicians, the government has so far remained silent on his recent troubles even as pressure from the political opposition for an investigation into Adani’s situation grows.

In recent years, Adani has pumped money into sectors like agriculture, defense and renewable energy — all seen as high priorities for the Indian government.

Like Adani’s commitment to the port in Israel’s Haifa, many of the group’s overseas infrastructure projects, in countries such as Sri Lanka and Tanzania, have served as an Indian counterweight to rival China’s holdings.

The Haifa deal was a coup for India, located close to another port managed by the Shanghai International Port Group.

“India is working with great fervor with Israel on defense and technology, and Adani now has a port there. You think the Indian government can sniff at that?” said Bhaskar. “The thing is, you can’t wish away Adani — because he is indispensable at this point.”

He expects Adani to remain undaunted.

“The more challenging a situation gets, the more defiant and creative he becomes to overcome it,” Bhaskar said.

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Senate passes Liberals’ controversial online streaming act with a dozen amendments

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By Mickey Djuric in Ottawa

Big tech companies that offer online streaming services could soon be required to contribute to Canadian content as a controversial Liberal bill gets one step closer to becoming law.

The Senate has passed the online streaming act known as Bill C-11 with a dozen amendments following a lengthy study by senators.

The bill would update Canada’s broadcasting rules to reflect online streaming giants such as YouTube, Netflix and Spotify, and require them to contribute to Canadian content and make it accessible to users in Canada — or face steep penalties.

Canadian Heritage Minister Pablo Rodriguez says he hopes the House of Commons will pass the bill next week after it reviews the Senate’s changes.

Senators made amendments intended to protect user-generated content and highlight the promotion of Indigenous languages and Black content creators.

They also included a change that would prohibit CBC from producing sponsored content, and another that would require companies to verify users’ ages before they access sexually-explicit material.

Rodriguez said Thursday that the Liberal government would not accept all of the Senate’s recommendations, but he didn’t say which ones he disagrees with.

“We’ll see when the bill comes back. There are amendments that have zero impact on the bill. And others that do, and those, we will not accept them,” the minister said Thursday during a Canadian Media Producers Association panel.

The Senate also removed a clause in the bill that Sen. Paula Simons described as giving “extraordinary new powers to the government to make political decisions about things.”

Ian Scott, the former chair of Canadian Radio-television and Telecommunications Commission, had told a Senate committee that some provisions in the bill did move the balance point “slightly closer to lessening the independence” of the regulator — though he insisted that it would remain independent.

The CRTC, now under the leadership of Vicky Eatrides, will be tasked with enforcing the bill’s provisions.

The Senate passed the bill on the anniversary of its introduction in the House of Commons.

Between the House of Commons and Senate, there have been approximately 218 witnesses, 43 meetings, 119 briefs and 73 proposed amendments, said Rodriguez.

“It’s the longest bill,” he said.

The proposed law has come under intense scrutiny amid accusations from companies and critics who said it left too much room for government control over user-generated content and social-media algorithms.

Rodriguez said tech giants can get creative with ways they promote Canadian content, such as with billboards, advertising or, if they so choose, tweaks to their algorithms.

The bill has also caught the attention of the United States. Its embassy in Ottawa recently said that it is holding consultations with U.S. companies that it is concerned could face discrimination if the bill passes.

Last week, two U.S. senators called for a trade crackdown on Canada over Bill C-11, saying that the prospective law flouts trade agreements.

“I’m not worried, because we think it complies with trade obligations,” Rodriguez said.

This report by The Canadian Press was first published Feb. 2, 2023.

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