As announced, the federal government will make Canadian banks pay part of the bill for the fight against COVID-19.
Posted at 6:26 p.m.
Banks and life insurers will have to pay a one-year temporary dividend equivalent to 15% of their profits that exceed 1 billion. Their tax rate will increase from 15% to 16.5%, which will bring $445 million a year to the government. Together, the two measures will generate 6.1 billion in additional revenue.
How much ?
6.1 billion
In additional taxes and dividends required from banks
Tax support to fight the pandemic was necessary, but the cost was “considerable”, justifies Ottawa. “The government is demanding that the largest banking and life insurer groups help pay for some of the costs of the pandemic response from which they have benefited.”
Of the 6.1 billion that Ottawa will seek from the safes of financial institutions by 2026-2027, two-thirds come from the special dividend and the rest from the increase in the tax rate.
Tuesday, at the meeting of shareholders of Scotiabank, its leaders had said that such a tax would be a bad idea. This is a “gut reaction that sends the wrong message to the global investment community,” said its chief financial officer, Raj Viswanathan.
Before the budget was tabled, CIBC chief executive Victor Dodig also criticized Ottawa’s intention to target a specific sector.
The federal decision to tax the banks was expected, but the government will ultimately seek less than the 10 billion it promised in the election campaign, observes tax expert Stéphane Leblanc, of the firm EY.
A simple choice
For the Federation of Quebec Chambers of Commerce, Ottawa’s decision to tax financial institutions is “a simplistic choice”.
“It is not acceptable for sectors to be penalized fiscally because they have made profits in the last two years or because they have recovered from the COVID-19 crisis more quickly than others. economic sectors, as mentioned in the budget documents, protests its president, Charles Milliard.
According to him, it is not desirable for companies that have performed well in recent years, or that are recovering quickly from the crisis, to be penalized. “A surgical review of public spending to identify inefficient fiscal measures is a better strategy to recover revenue for the state,” he said.