Corporate profits

NDP tax on ‘excess’ corporate profits during pandemic would increase government revenues by $ 8 billion: PBO

The proposal targets companies generating more than $ 10 million in annual revenue and would double the income tax payable on all 2020 profits that exceed their annual average since 2014

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OTTAWA – A new 15% tax on businesses that made “excess profits” during the COVID-19 pandemic would bring nearly $ 8 billion to government coffers, according to the Parliamentary Budget Officer.

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“With a pandemic tax on profits, the PBO has (concluded) that it could raise in just one year $ 8 billion in new revenue that we can reinvest in small businesses, we can reinvest in people,” said NDP Leader Jagmeet Singh on Tuesday.

The PBO’s new report was commissioned by NDP MP Peter Julian, whose party has been pushing for a surplus profit tax in addition to a slew of new taxes on wealthy individuals and corporations since the early months of the pandemic.

The NDP proposal targets companies generating more than $ 10 million in annual revenue and would double income tax payable – 30% instead of 15% on average – on all 2020 profits that have surpassed their annual average since. 2014.

In other words, the federal government would double tax every dollar of profit a large company made during the COVID-19 era that goes beyond its normal profits in the pre-pandemic years.

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In total, PBO Yves Giroux determined that the new tax would generate $ 7.9 billion in 2020.

“That’s a huge amount of new income,” Singh said. “These are just ideas that we want the Liberal government to consider. Why not seek to make the ultra-rich pay their fair share? Why not introduce a tax on excess profits that we did in the past during the world wars? “

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In his study, Giroux determined that the sectors contributing the most to a tax on excess profits would be manufacturing companies ($ 1.87 billion), followed closely by mining, quarrying and oil extraction companies and of gas ($ 1.37 billion).

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But he says it’s mainly because these sectors make up such a large part of the Canadian economy, and not specifically because they achieved much higher incomes during the pandemic.

Unsurprisingly, the sectors hardest hit by the COVID-19 lockdown measures such as tourism, the arts and education services would pay next to nothing.

The PBO also warned that this “excess profit” is not necessarily attributable to controversial business practices such as rising prices during times of limited supply during the pandemic.

“Our estimate should not be interpreted as evidence of undue price increases in response to the pandemic. Several factors can lead to increased profits, such as improvements in productivity, economies of scale or reduced input costs, ”Giroux’s report reads.

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For the leader of the NDP, the tax is necessary to level the playing field between large businesses and small businesses.

“As we see big corporate grocery stores like Loblaws getting public aid or making record profits, then slashing frontline worker benefits and paying massive bonuses to their executives, we see struggling small businesses. “Singh said.

At his press conference, the leader of the NDP was accompanied by Jay Roy, owner of a comic book store in Sackville, Nova Scotia.

“All of my small business friends and I work so, so hard every day trying to find new solutions and new strategies to be successful every day,” Roy said. “And then we watch these big companies make billions of dollars and have nothing to pay. It’s not fair.”

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On Tuesday, a spokeswoman for Finance Minister Chrystia Freeland declined to say whether the Liberal government was considering a surplus profits tax in the wake of the PBO report.

Instead, Katherine Cuplinskas insisted the government was committed to making Canada “fairer and more equitable for all,” then listed numerous tax measures announced in the government’s 2021 budget last week.

“We are moving forward in Budget 2021 to implement a tax on multinational digital giants; limit the levies on stock options in the largest companies; fight against tax evasion; reduce the cost of credit card transaction fees to help small businesses; and implement a national tax on the unproductive use of domestic housing owned by non-residents, non-Canadians, ”Cuplinskas said in an email.

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