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OTTAWA—Canada’s financial sector has been the greatest beneficiary of recent corporate income tax cuts, says a study released today by the Canadian Centre for Policy Alternatives (CCPA). The study, by economist Toby Sanger, says Canada should join other countries in introducing fairer taxes on the financial sector that could generate over $10 billion a year.
According to the study, cuts in corporate income tax rates since 2000 have provided a benefit to the finance and insurance industry worth approximately $4 billion a year in 2010. Further planned corporate income tax cuts will increase the value of this benefit to an estimated $6 billion a year by 2012.
The financial sector has also benefited from the broad exemption of financial services from sales taxes, as well as from preferred tax rates applied to capital gains taxes and stock options. In total, the value of these tax preferences and recent tax cuts now adds up to approximately $11 billion a year for Canada’s financial sector and is projected to reach over $14 billion a year in 2013.
“At a time when individual Canadians are scrambling to file their taxes, the finance industry is enjoying another year of multi-billion dollar tax breaks thanks to corporate tax cuts and other tax preferences,” says Sanger. “There is little evidence that these tax preferences and cuts have had a positive economic impact beyond their benefits to the finance industry and its shareholders.”
The study recommends establishing a fairer tax system and broadening the base by:
- Introducing a Financial Activities Tax (FAT) on financial sector profits and remuneration to compensate for the under-taxation of the financial sector.
- Eliminating tax preferences for stock options and capital gains.
- Reversing recent corporate tax cuts.
- Working with other countries to establish global financial transactions taxes.
“It’s a cruel irony that, after an economic crisis that cost the public purse hundreds of billions of dollars, our governments are rewarding those who caused the crisis with an expanded financial safety net and lower taxes, but making individual Canadians pay for it with higher taxes in other areas and reduced social services,” Sanger says.
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Fair Shares: How Banks, Brokers and the Financial Industry Can Pay Fairer Taxes is available on the CCPA website: http://policyalternatives.ca
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