Sep 21, 2021
Liberals' bank surtax is 'pandering politics': Former RBC CEO
The proposed Liberal bank tax doesn’t make any sense from a policy perspective: Gord Nixon
A former chief executive of Royal Bank of Canada said the federal Liberals’ plan to slap a surtax on big bank and insurance profits “makes no sense” and called the move a purely “political decision.”
“That type of policy is pandering politics,” said Gord Nixon, who is also chairman of BNN Bloomberg parent company BCE Inc., in an interview Tuesday. “It might sell well in terms of achieving votes but it doesn’t make any sense from a policy perspective.”
The Liberals proposed a three-per-cent additional tax on profits that exceed $1 billion for Canada’s biggest banks and insurance companies as a way to help pay for new program spending, although some Bay Street analysts feel the plan lacks crucial details.
Nixon implied he isn’t necessarily surprised politicians took aim at big banks given his prior experience as RBC's CEO and president from 2001 to 2014.
“Why the banks? Other than they’re an easy target,” he said. “The banks always deal with political issues.”
He said there are a few sectors, such as technology and grocers, that fared much better than banks and insurers through the COVID-19 pandemic, which suggests the targeted tax has political undertones.
“The banks actually didn’t do very well during the pandemic. You look at the three-year returns on banks, they’re up less than five per cent. The S&P is up close to 15 per cent,” he said. “I’m not suggesting there’s hardship there. But their earnings were very strong the last two quarters, largely because they were reversing a lot of loan losses that were taken when the pandemic first hit.”
Instead of a bank tax, Nixon would rather see policies that help attract business investment and talent, something he felt the campaign platforms proposed by Canada's major political parties lacked.
“A lot of the issues that needed to be discussed were not necessarily discussed. And I think clearly, the result is that there is no mandate, if you will, given to the Liberal Party.”
Another one of Nixon's concerns is the ballooning federal debt burden. The Conservative Party was the only major federal party to propose bringing the budget back to balance within a decade.
“We can’t just spend and spend and push that problem down the road. One of the problems of politics – and it’s all political parties – is it’s very easy to spend when you don’t have to live with the consequences of that spending for many years down the road. But there’s always a day of reckoning,” he said. “That day of reckoning is ultimately going to appear whether it’s through higher inflation or anemic economic growth.”