The federal government is poised to reap almost a billion fewer dollars from its bank surtaxes than it estimated, according to the Parliamentary Budget Officer.
The budget watchdog stated Thursday it expects the government will generate about $5.27 billion from the proposed increase in tax rates on profits over $100 million – to 16.5 per cent from 15 per cent – and the so-called Canada Recovery Benefit, which imposes a one-time 15 per cent tax on earnings over $1 billion for a two-year period.
The combined proceeds fall about $800 million short of the government’s estimate for $6.1 billion in revenue from the measures over the next five years.
The two additional targeted taxes were initially unveiled in the Liberal Party of Canada’s platform for the 2021 federal election (when Liberal Leader Justin Trudeau said the “extraordinarily large profits” made during the pandemic should in part flow back to taxpayers) before scaled-back versions were announced in this year’s budget.
The proposed surtaxes were quickly met with opposition from the industry, which argued they would unfairly punish banks that worked with government to swiftly roll out pandemic support measures.
The Canadian Bankers Association previously said the banks are already among the largest taxpayers in the country, estimating the Big Six generated $12.7 billion of tax revenue in the 2019 fiscal year, and highlighting that they also provide important dividend income for ordinary Canadians.
Brian Porter, chief executive of The Bank of Nova Scotia, was poised to be less nuanced in his response to the taxes. In prepared remarks for his bank’s annual general meeting in April, Porter called them “a knee-jerk reaction.” However, he didn’t ultimately deliver his speech due to a COVID-19 diagnosis.
Draft legislation to enshrine the surtax and Canada Recovery Dividend was released in August and is open for public comment until Sept. 30.