Budget 2022 puts high earners on notice, targets big banks but Singh wants Trudeau to go further

The 2022 federal budget includes a pair of tax increases for big banks and insurance companies that will bring in more than $6 billion in revenue and put high income earners on notice that they could be next. But NDP Leader Jagmeet Singh says he thinks Prime Minister Justin Trudeau should have gone further.

Asked in an interview on CTV’s Question Period whether he thought the wealthy-targeting moves were enough, Singh said no.

“It would not be what I would have done as prime minister, but it is what we were able to achieve with the Liberal government in power,” Singh said. “We used our power to make sure that some of the wealthiest are paying their fair share. But that's one revenue stream. We argued for a lot more than that.”

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As part of the Liberal-NDP deal the two parties agreed to very broadly move forward with making the tax system more fair, including “moving forward in the near term on tax changes on financial institutions who have made strong profits during the pandemic.”

In an effort to help boost revenue to pay down Canada’s deficit, the federal Liberals are moving forward on a series of measures meant to crack down on tax avoidance and make the big banks and insurance companies “help pay for the recovery.”

The Liberals are taking a two-pronged and more aggressive approach than they campaigned on when it comes to forcing big chartered banks and major insurance companies to share their pandemic-generated wealth by increasing their corporate income taxes.

Wealthy financial institutions are being squeezed in two ways:

• A one-time 15 per cent tax will be imposed on taxable income above $1 billion that was earned by banking and life insurers’ groups in the 2021 tax year. Called the “Canada Recovery Dividend,” the increase will be paid in equal installments over the next five years; and
• Going forward the government will permanently increase the corporate income tax rate by 1.5 per cent on the taxable income of banks and insurance firms that is above $100 million, seeing their overall federal corporate income tax rate increase from 15 per cent to 16.5 per cent.

Together, these policies will net $6.1 billion over the next five years, and then the permanent increase is estimated to keep bringing in hundreds of millions in the years following.

CTV News was first to report that the budget would target these companies, after banks had been pushing behind the scenes for the government to change course. 

Economists and representatives from these major financial institutions have cautioned that while going after banks may be popular politically, the cost could get passed on to bank customers in the form of higher fees, unless the government moves to prohibit that.

“Not only is the bank tax a knee-jerk reaction that sends the wrong message to the global investment community… it is ultimately a tax on you, our shareholders – approximately 70 per cent of whom are Canadian. It’s a tax on those who directly own our shares or participate through pension plans or mutual funds, index funds or ETFs [exchange-traded funds],” said Scotiabank CEO Brian Porter in an address to shareholders at the bank’s annual general meeting on Tuesday, according to his prepared remarks.

In addition to going after banks, the budget also puts high-earning individuals on notice.

After already increasing taxes on the wealthiest one per cent of Canadians, in the budget the Liberals warn that some high-income Canadians aren’t paying enough in personal income tax.

“28 per cent of filers with gross income above $400,000 pay an average federal PIT [Personal Income Tax] rate of 15 per cent or less, which is less than some middle class Canadians pay,” reads the budget.

As a result, the government says it will be examining “a new minimum tax regime, which will go further towards ensuring that all wealthy Canadians pay their fair share of tax.”

Singh agrees with this move.

“We think that the super wealthy aren't paying their fair share... So we would do a lot more,” he said.

The NDP have said that they want to see profitable oil companies and big-box stores also subjected to a corporate tax increase. It’s something Singh has said he’ll keep pushing for, opening up the potential for further measures aimed at the wealthiest Canadians to be added into the two party confidence-and-supply agreement in the years ahead.