Two new taxes on Canadian banks and insurers could generate $5.3 billion over five years, the Parliamentary Budget Officer said Thursday.
The taxes, which Prime Minister Justin Trudeau proposed during last year’s Canadian election campaign, would bring in less revenue than the $6.1 billion estimated in April’s budget.
The PBO calculates that $3 billion will come from a one-time Canada Recovery Dividend. This is a 15 per cent surtax on domestically-generated profits over $1 billion in the past two years to be paid in equal instalments over five years.
Finance Minister Chrystia Freeland is also proposing an additional increase of 1.5 percentage point to the corporate tax rate paid by banks and insurers on income over $100 million. This will generate another $2.3 billion, the PBO said.
Banks pushed back on the levy after Trudeau first announced it on the campaign trail last year.
The Canadian Bankers Association (CBA) criticized the plan, accusing the government of “singling out” the financial services industry and saying the tax hit will “merely re-direct” bank profits from Canadians — in the form of stock dividends — to government coffers.
Additional reporting by Barbara Shecter, Financial Post