The proposed Liberal bank tax doesn’t make any sense from a policy perspective: Gord Nixon
Former Parliamentary Budget Officer Kevin Page said he was surprised the federal government’s fiscal and economic update did not include any new details on the Liberals’ proposed surtax on large financial institutions.
“If these changes are going through and going to start calendar year 2022, I was expecting they would be announcing it in the update,” said Page, president and CEO of the Institute of Fiscal Studies and Democracy, in an interview. “I guess they can still do it early in the New Year.”
On the campaign trail this fall, the federal Liberals pledged to apply a surtax of three percentage points on banks and insurance companies with annual earnings of at least $1 billion, but have yet to provide any additional details on that or the so-called Canada Recovery Dividend that the Liberals said would be paid by those same institutions.
The proposed measures would provide the federal government with some much needed revenue, amid historic spending to combat COVID-19.
“It was signalled in the policy platform, so it wouldn’t be unusual for them to backdate some of these tax changes given they’ve already forewarned us, but I was surprised it didn’t show up in the update,” said Page.
Investment Adviser Alan Small agreed, and said he too was surprised there wasn’t more information provided in Tuesday’s economic update, but said ultimately, he’s concerned how such a tax would impact consumers.
“You tax the banks and they just pass those costs along to the average person,” said Small, senior investment advisor at Allan Small Financial Group, iA Private Wealth Inc., in an interview. “Will they raise the cost of borrowing, or will they raise interest on their lines of credit, or whatever they need to do to cover that tax.”
Canada’s big banks have warned that an additional tax on their profits would have a material impact on their balance sheets, which is likely why the federal government is proceeding cautiously on its implementation, said Small.