A budget lax on corporate tax
As most of us were filing our own taxes, and the links between record-breaking corporate profits and inflation, inequality and the housing crisis were under scrutiny, the federal budget fell short on ensuring corporations pay their fair share. Corporate profit margins in 2021, across all of Canada’s major economic sectors, were their highest in 20 years, thanks in part to corporate price hikes that are exacerbating inflation. Meanwhile, corporate tax rates hit an all-time low last year, despite decades of corporate tax cuts not resulting in more or better jobs, or increased investment in productive capacity. Budget 2022 made limited progress towards fairer corporate taxation with a 1-time 15% surtax on the taxable income of banks and life insurance companies above $1 billion, and a permanent 1.5% increase on the same companies for any income above $100 million. Other large companies and their huge pandemic profits were left largely untouched. The budget also moved to stop Canadian-controlled private corporations from avoiding tax by reincorporating in foreign jurisdictions, thus paying lower tax rates on their passive income. However the biggest loopholes, such as for capital gains exclusion, were left in place. Meanwhile, little was done to address the role of our tax system in a housing crisis that’s turbocharging the wealth gap, with real-estate investment trusts (REITs) still able to collect profit tax-free while they undermine affordability of rents and home ownership. As for taxing those who benefit most from record profits, Canada’s little-known alternative minimum tax is slated for a revamp. It’s welcome, and overdue since more than a quarter of people earning over $400,000 a year have been paying below the lowest tax bracket. That said, it would be far wiser to implement a reasonable wealth tax. Our most notable victory in this Budget is the announcement of public searchable registries of the beneficial owners of companies and real-estate, following years of campaigning – a critical step in preventing crooks from dodging taxes, hiding ill-gotten gains or avoiding sanctions via anonymous Canadian shell companies. Overall, the budget’s healthy spending continues to bury austerity as a viable economic theory. |
