Ottawa is raising taxes on Canada’s big banks and life insurance companies.
The government says the country’s major financial institutions made significant profits during the pandemic and have recovered faster than other parts of the economy — in part due to the federal pandemic supports for people and businesses.
The federal budget includes a one-time, 15 per cent charge on taxable income above $1 billion for the 2021 tax year for the country’s big financial institutions.
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Ottawa also plans to permanently increase the corporate income tax rate for banking and life insurance groups by 1.5 percentage points for taxable income above $100 million.
The increase would bring the tax rate on income above that threshold to 16.5 per cent from 15 per cent.
The budget estimates the two measures combined will raise $6.1 billion over five years with some $4.05 billion attributable to the one-time tax.
The Canadian Bankers Association, which represents more than 60 domestic and foreign banks, said it opposes singling out specific economic sectors for special taxation.
It noted that banks are already among the largest corporate taxpayers in Canada with the six largest banks paying more than $12.5 billion in taxes to all levels of government in 2020, including $6.5 billion to Ottawa.
“During the pandemic, Canada’s banks provided hundreds of thousands of Canadians with mortgage relief, waived millions in fees for individuals and small businesses, and were instrumental in standing up essential programs like the Canada Emergency Relief Benefit and the Canada Emergency Business Account,” spokesman Mathieu Labreche wrote in an email.
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The Canadian Life and Health Insurance Association said it was reviewing the previously announced tax measures aimed at financial institutions.
“While we are still reviewing the details of the measures, it appears that the scope for the corporate tax rate increase has broadened from the original proposal and will have a broader impact for life and health insurers,” said spokeswoman Susan Murray in an email.
“These measures come at a challenging time for life and health insurers as we continue to face headwinds from the COVID epidemic in the form of higher health related and other life protection costs. These higher impacts will be with us for many years.”
This report by The Canadian Press was first published April 7, 2022.