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Liberals’ new bank surcharge tax on profits over $1 billion could be implemented by start of 2022

The Globe and Mail | James Bradshaw | Nov 15, 2021

new bank tax - Liberals’ new bank surcharge tax on profits over $1 billion could be implemented by start of 2022Canada’s major banks are expecting larger tax bills in 2022 as a new surcharge on financial institutions’ profits over $1-billion could be pushed through by Ottawa as soon as the start of 2022.

In late August, during the federal election campaign, the Liberal Party promised to raise corporate taxes on large banks and insurers by 3 per cent and collect a special fee from them called the Canada Recovery Dividend.

The permanent tax increase and the temporary recovery dividend are intended to raise a combined $2.5-billion each year for the next four years, with proceeds earmarked to help pay for a housing plan with the goal of making it easier for some people to own a home.

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When the proposal was announced, senior bankers were privately outraged at being singled out as an industry. Major technology and telecommunications companies that provided essential services and performed well in the pandemic were spared. Among bank chief executives, Canadian Imperial Bank of Commerce CEO Victor Dodig was the only one who spoke out publicly against “intervention in any particular industry sector, because that doesn’t attract foreign capital.”

More recently, that anger has given way to a sense of resignation as top executives at banks broadly expect the tax will be imposed in the coming months, according to five senior banking industry sources – and perhaps as soon as January. The Globe and Mail is not identifying the sources because they were not authorized to discuss interactions with government.

The plan’s finer details have not yet been discussed publicly as the federal government is still setting legislative priorities to be outlined when the House of Commons convenes to sit for four weeks starting on Nov. 22. Government officials have not said when they might take steps to enact the tax increase on banks and insurers.

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The Liberals’ campaign platform included some tax changes that were promised to take effect as of Jan. 1, 2022.

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