Two Parliamentary Budget Office (PBO) reports estimate that proposed new federal corporate taxes on banks and life insurance companies could reap the government about $5.3 billion over the next five years. $3 billion is estimated to be generated from a one-time 15% windfall tax, dubbed the Canada Recovery Dividend, that would be applied to banks and life insurers’ profits that were made during the pandemic period.
The government is also proposing an increase to the corporate tax rate on banks and insurers that generate more than $100 million in profits. Finance minister, Chrystia Freeland, indicated that the tax rate hike could increase from the current 15% to 16.5%. This increment would be expected to generate $2.3 billion over the next five years.
The windfall tax and hiked corporate tax would net the government about $5.3 billion over the next five years, a few hundred million short of earlier estimates. A federal budget report in April had estimated that these suggested measures would likely raise about $6.1 billion.
These new tax measures were part of campaign promises that Prime Minister Justin Trudeau made last year to help win favour amongst left-wing voters. Bank executives have long since opposed the new tax proposals, stating that they unfairly targeted their industry and would compromise the dividend payments that they provided to retirees.
Financial experts have also criticised the government for proposing the taxes as they expect it will push the financial institutions into passing on the costs to their consumers by charging them higher fees.
Another piece of legislation that is garnering much attention is the government’s Bill C-30 affordability plan that is being proposed as a measure for addressing inflation and cost of living woes. Under the plan, the government is seeking to use $4.5 billion in alleviating the financial pressures on low-income families. It would go towards doubling the federal tax rebate for low-income earners, provide $500 in rental support, and cover dental expenses to the tune of $650 for children below the age of 12. This legislation is expected to be introduced and passed by the start of December.
This scheme is however facing opposition from Conservative Party leader, Pierre Marcel Poilievre and some economists who believe such a move could worsen inflation. Conservatives have, however, stated that they may be willing to support some, but not all, of Bill C-30. Conservative party MP, Michael Barrett, has highlighted the rental support and dental care components as aspects the party would not support as they would add to inflation and interfere with provincial jurisdiction.
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