Just as some of Canada’s largest banks release results of their hefty earnings for the third quarter, Prime Minister Justin Trudeau has pledged to boost the corporate tax rate in an effort to help pay for the Liberals’ housing plan.
In a news release on Wednesday, Trudeau proposed raising the corporate tax rate on major banks and insurance companies from 15% to 18% on earnings exceeding $1 billion. The new policy is slated to come into effect sometime between 2022 and 2023, and is expected to generate a minimum revenue of $2.5 billion per year over a duration of four years. Trudeau also revealed plans to create a Canada Recovery Dividend, which is expected to help fund the Liberal’s housing affordability initiatives.
“We have to rebuild a better Canada— one that works for everyone. That’s why we’re going to ask our largest financial institutions, who have recovered faster and stronger than many other industries, to pay a little more so we can invest in Canadians and help them find a home of their own,” Trudeau explained.
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Since the peak of the pandemic, Canada’s big six banks have roared back stronger than ever, posting double-digit increases in net income in the fiscal third quarter. In response to the Liberal’s proposed tax hike, the the Canadian Bankers Association— which represents approximately 60 Canadian banks— has raised alarm over the decision, warning that it could create significant losses to shareholders, and raise costs for customers.
“Singling out specific economic sectors for special taxation is a proven detriment to economic growth and has been abandoned as a strategy from previous governments that tried to pursue similarly counterproductive policies. Banks are already among the largest taxpayers in Canada,” the group told Bloomberg.
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