Ottawa raising taxes on big banks and life insurance companies

Ottawa raises taxes on Canada’s large banks and life insurance companies.

According to the government, the major financial institutions in the country made substantial profits during the pandemic. They also recovered faster than other areas of the economy due to federal pandemic support for people and businesses.

The federal budget contains a 15% one-time charge on taxable income exceeding $1 billion for the 2021 fiscal year. This is for large financial institutions.

Ottawa also plans on permanently increasing the corporate income tax rates for life and banking by 1.5 percentage points, for taxable income exceeding $100 million.

The tax rate on income would rise to 16.5 percent from 15% with the increase.

Budget estimates that these two measures together will raise $6.1 Billion over five years, with approximately $4.05 Billion attributable to the one time tax.

The Canadian Bankers Association represents more than 60 banks in Canada and abroad. It said it opposed the taxation of specific economic sectors.

It was noted by the report that banks are already among Canada’s biggest corporate taxpayers. In 2020, the six largest banks paid more $12.5 billion in taxes to every level of government, including $6.5 billion for Ottawa.

Mathieu labreche, a spokesperson for Canada, wrote in an e-mail that “During the Pandemic, Canada’s banks provided hundreds and thousands of Canadians mortgage relief, waived million in fees for small businesses, and were instrumental to setting up essential programs like Canada Emergency Relief Benefit, and Canada Emergency Business Account.”

The Canadian Life and Health Insurance Association stated that it was reviewing previously announced tax measures aimed towards financial institutions.

“While we are still examining the details of these measures, it appears the scope for corporate tax rate increases has expanded from the original proposal. This will have a wider impact for life- and health insurers,” Susan Murray, spokeswoman, stated in an email.

“These measures come at an extremely difficult time for life insurances, as we continue facing headwinds from COVID. These include higher life protection and health related costs. These higher impacts will continue to be with us for many more years.”

This report was first published by The Canadian Press April 7, 2022.