Liberals should raise taxes on big banks and insurance companies in the budget

Sarah Ritchie, The Canadian Press

Posted Wednesday, April 6, 2022 2:45 PM EDT

Last updated Wednesday, April 6, 2022 2:45 PM EDT

OTTAWA – The final message to Scotiabank shareholders in its president and CEO’s annual address: A higher tax on the country’s biggest banks is a tax on you.

Brian Porter called a tax hike expected to be included in Thursday’s budget “a knee-jerk reaction that sends the wrong message to the global investment community.”

He made the comments in written remarks prepared for Tuesday’s annual meeting of shareholders, but he did not deliver the address in person.

The financial sector is preparing for changes in its tax rate after the confidence and supply agreement between the Liberals and the NDP has pledged to move forward with “short-term” tax changes.

NDP Leader Jagmeet Singh said Tuesday that ensuring those who have benefited from the pandemic “start paying their fair share” was a key part of the agreement with the Liberalsalthough it is unclear what specific changes the government might explore.

During the 2021 election campaign, Prime Minister Justin Trudeau promised a corporate tax surtax to the nation’s largest banks and insurance companies.

the Liberals it is estimated that taxing profits over $1 billion at 18% instead of 15 would bring in about $1.2 billion a year.

During the election campaign, Trudeau also promised a four-year “stimulus dividend” which he said would be a temporary way for banks to help with the pandemic recovery, given that they have done relatively well throughout. long.

the Liberals said they would use the extra money to help Canadians who are struggling to afford record house prices – although that’s before they strike a deal with the NDP.

The party’s list of joint priorities now includes pressing commitments like providing dental care for the children of low-income people this year and creating a pharmacare program.

But some economists argue that the policy does not make sense.

Ian Lee, a professor at Carleton University’s Sprott School of Business, said a tax hike “is a great optic.”

“Either directly or indirectly they say ‘Look, this is how we’re going to tackle inequality’,” he said. “We’re going to go after those big, rich banks.”

The Canadian Bankers Association says the six largest banks had net income of $46.6 billion in 2019 and they collectively paid $12.7 billion in taxes to all levels of government this year- the.

Canadians for Tax Fairness is calling for a series of changes in this budget that it says will generate an additional $92 billion a year in government revenue. This includes a “pandemic-based excess profits surcharge” on corporations and an increase in the corporate tax rate to 20% across the board.

Lee said a higher tax bill won’t translate into lower profits for companies, which will simply absorb the extra cost and pass it on to customers or workers.

“It’s just another cost of doing business. There is nothing magical or special about taxes,” he said.

But the next Liberal budgets depend on the support of the NDP, and this party wants to go further.

“It shouldn’t just be about the banks, it should be about the big grocery chains, the big box stores, the oil companies,” said NDP MP Niki Ashton.

Canadian Center for Policy Alternatives senior economist David Macdonald said he thinks a bank tax is “a certainty for this budget,” and the question for him on Thursday is whether it goes further. .

The banks, for their part, speak little.

CIBC President and CEO Victor Dodig told a group of investors on an earnings conference call in August that banks had “always been in the crosshairs.”

“Most Canadians, whether through large pension plans or their own investments, have investments in banks and they benefit from these dividends that we pay out and they benefit from our economic growth,” he said. -he declares.

CIBC, RBC, Scotiabank and National Bank of Canada did not accept an interview. TD Bank and BMO did not respond to a request for comment.

The Canadian Bankers Association also declined to comment, pointing to a statement it issued during the election campaign saying bank profits maintain the stability of the financial system, “ensuring the safety and security of Canadians’ deposits,” and pointing out that many banks and their employees donate to charity.

This report from The Canadian Press was first published on April 6, 2022.

Kristan F. Talley