The House of Commons committee studying food price inflation is recommending a windfall tax on large corporations, pending evidence that companies have generated excess profits from higher food prices.
A report released this week by the Standing Committee on Agriculture and Agri-food acknowledges Canada’s big grocers have enjoyed higher than normal profits and the federal government may need to take action with a tax on corporations’ excess profits.
“The Committee recommends that, if the Competition Bureau finds evidence in its upcoming market study that large grocery chains are generating excess profits on food items, the Government of Canada should consider introducing a windfall profits tax on large, price-setting corporations to disincentivize excess hikes in their profit margins for these items.”
This recommendation is welcome news to C4TF, whose research has been drawing attention to the role corporate profits have played in driving inflation. C4TF has been campaigning for a windfall tax on large corporations to recover revenue and deter them from hiking profits margins.
Their report cites research by C4TF economist Dr. DT Cochrane, who testified at committee earlier this year about how corporations are not just passing along higher costs, but boosting profit margins:
“[T]he profit margin of Canadian corporations jumped significantly in 2021. From an average pre-tax margin of 9% over the previous two decades, the margin reached almost 16% in 2021. Preliminary data for 2022 suggests that profit margins remained elevated.”
While there have been cost increases beyond any company’s control, at almost every step in food supply chains, there are corporations seeking the greatest possible profit and some have more power than others.
“The question of who gets to pass along higher costs, who has to absorb higher costs, and who gets to pass along more than higher costs is one of power and redistribution. Currently, some of Canada's biggest corporations have a lot of pricing power. Unsurprisingly, they are taking advantage of it, to the detriment of Canadians, ” Dr. Cochrane testified.
Report calls for more transparency and cooperation from corporations
The committee leaves the decision of whether big grocers’ profits have been excessive to the Competition Bureau but at the same time, acknowledges the agency’s limitations.
As we’ve pointed out in media interviews, Loblaws and other big retailers can be selective about the kind of information that they provide, which limits the government’s ability to investigate competition in the sector.
The committee makes several recommendations to strengthen the Bureau’s ability to perform its duties. These include legislative changes giving it the power to compel companies and individuals in its market studies “to provide it with relevant documents and information, including disaggregated financial data.”
The Bureau cannot rely on voluntary participation and disclosure from corporations. It needs access to all the essential information.
Next steps: Canada needs a windfall tax on large profitable corporations
We’re encouraged by the report’s recommendations, which show that public pressure from C4TF and other advocates has succeeded in drawing the government’s attention to how profitable corporations are contributing to Canada’s cost of living crisis – and the policy measures that are needed to fix this problem.
With the Competition Bureau set to release its market study on grocery retailers later in June, it is important that Canadians continue to call for greater transparency from the big grocery chains that control more than 75% of our food price retail market.
We also recommend that an excess profits tax should be applied to all large corporations that have profited since the pandemic – not just food retail.
Our study earlier this year on big corporations that profited from public money while avoiding billions in taxes spanned a range of sectors, from telecom to oil and gas. A windfall tax would raise $11 billion in revenue, estimates show.
If you haven’t already, please sign our petition calling for an excess profits tax on large corporations in Canada.