The 2022 Federal Budget offers some important fair tax measures advocated by Canadians for Tax Fairness (C4TF), and delivered on some of the Liberal’s many fair tax promises since 2015, while falling short on key areas of taxing extreme wealth or excess corporate profits, and on addressing root causes of the housing crisis.
Transparency and tax-dodging: Budget 2022 delivers a key tool in fighting tax-dodging and transnational crime: a public, searchable registry of the beneficial owners of companies and trusts by 2023, which will be integrated with provincial and territorial data. This important tool will help stop criminals and tax-dodgers, who have been taking advantage of Canada’s weak transparency laws to hide behind anonymous shell companies.
“We are very pleased that Canada will finally take a strong stand against tax-dodging and financial crime,” said C4TF economist Dr. DT Cochrane. “After years of hard work, this is a huge win for Canadians for Tax Fairness and our allies in the End Snow-Washing Coalition – Transparency International Canada, and Publish What You Pay Canada.”
Housing affordability: The housing crisis has been exacerbated by a tax break for real-estate investment trusts (REITs) that allows them to collect profit tax-free. Budget 2022 acknowledges that large corporate investors have put pressure on housing prices, but only makes a vague promise to evaluate the situation with no timeline.
“We can’t solve the housing crisis until we stop treating people’s houses like assets, instead of homes,” said Katrina Miller, Executive Director of C4TF . “This budget has failed to address the root causes of a major crisis. Building more affordable housing alone is not enough.”
Corporate taxation: Corporations made 20-year high profit margins in 2021, while paying ultra-low effective tax rates. Budget 2022 imposes 1-time 15% surtax on banks and life insurance companies, on taxable income above $1 billion. It also imposes a permanent 1.5% increase on the same companies for any income above $100 million. However, corporate profits remain under-taxed with little rationale as to why.
“Any excess corporate profit tax on banks and insurance companies should apply to all large companies, which are raking in huge gains, especially during a global pandemic,” said Dr. Cochrane. “Canada’s corporate tax rate is at an all-time low of 15%, contrasted with over 40% in the 1980s.”
Wealth taxation: Canada’s wealthiest 1% control over a quarter of the country’s entire wealth, and are able to avoid taxes through various sophisticated means. The Liberals promised to impose a 15% effective minimum tax rate on the top 1% of earners, to ensure they pay their fair share. Despite acknowledging the problem, Budget 2022 only offers to examine the issue. Canada should follow President Biden’s lead in proposing a 20% minimum tax rate on wealth over $100 million USD.
“Budget 2022 continues to put Canada at the back of the pack in terms of taxing wealth,” said C4TF Executive Director Katrina Miller, “We need to get serious about taxing wealth if we want to tackle inequality and invest in services and projects that make life better for everyone in Canada.”