Former US President Barack Obama spread the term “teaching moment” when he had the opportunity to inform the public about important collective issues.Canada’s Recent federal budget We provide such an opportunity for the burden of business income tax.
In particular, Budget 2022 Introduced Canada Collected Dividend. This temporarily imposes a 15% tax on banks and life insurers with profits in excess of $ 1 billion. We also permanently raised the business income tax rate for banks and life insurers from 15.0% to 16.5% for profits in excess of $ 100 million.
Taken together, these two measures are expected to increase taxes by $ 6.1 billion over the next five years, and assuming that the “temporary” tax actually remains a temporary tax, it will continue to be approximately $ 445 million. There is a prediction of.In budgetThe government said these two measures “ensure that these large financial institutions support Canada’s broader recovery.” Language is really important. The government has proposed that the agency pay these taxes.
But of course, a piece of paper cannot pay taxes. People pay taxes. Therefore, in some way, shareholders, workers, and / or customers will pay for these higher taxes rather than “large financial institutions.” It is only convenient and politically selling that the government characterizes these higher taxes as being imposed on banks and life insurance companies.
according to study Economists Ken Mackenzie and Ergete Ferrede calculated the impact of the Alberta government’s decision to raise corporate tax rates by 2 percent in 2015 in 2017, and a significant portion of the business tax burden due to wage cuts. Depends on the worker. According to the survey results, the income of an average two-income household in Alberta decreased by about $ 830 a year.Similar results were seen in other studies Canada And the United States has shown that workers ultimately bear much of the corporate income tax burden.
Therefore, if the government lowers business taxes, workers may benefit from higher wage increases.After tax cuts and the Employment Act (2017) reduced the US federal income tax rate on businesses from 35% to 21%, one study found. Estimated The tax cut will raise workers’ wages by 1.5% and increase full-time jobs by 339,000.another Research found Wage growth for American workers has risen from an average of 2.4% in 2016 and 2017 to 3.8% by October 2019 after tax cuts.
But let’s assume that the burden of these taxes actually rests with the shareholders of the bank or life insurance company. The problem is that the owners are mostly us, the average Canadian worker.
Canadian pension plans that all workers (outside Quebec) must contribute to investment (As of March 2022) At all major banks and many insurance companies. Similarly, if you look at almost every mutual fund or exchange-traded fund, including Canada’s equity, you may find a major Canadian bank or, to a lesser extent, a life insurance company that represents Core Holdings. For example, of Canada’s 10 largest investment trust companies, Canada’s largest banks make up 3 to 5 of the top 10 Canadian equity funds.
Simply put, Ottawa’s new tax increase burden on banks and life insurers will be for Canadian workers who have invested in such companies (directly or indirectly through the CPP) and employees of affected companies. It depends on the average.
The views expressed in this article are those of the author and do not necessarily reflect the views of The Epoch Times.