"exceptional" profits of businesses A tax would have yielded 7.9 billion
(Ottawa) the Parliamentary Budget Officer estimates that a tax on windfall profits made by large corporations last year, during the pandemic, would have brought the federal treasury $7.9 billion.
Mis à jour le 27 avr. 2021 Christopher Reynolds La Presse CanadienneThe estimate of the Parliamentary Budget Officer (DPB), requested by a NDP MP, was calculated by analysing the results of companies whose profits exceeded their expectations for 2020-in the midst of a pandemic. The MP proposed to the DPB a rate of 15 per cent for this tax on "exceptional" profits-based on the average profit margin over the past five years-in addition to the current 15 per cent federal corporate income tax rate.?
New Democrat MP Peter Julian pointed out to the DPB that this measure is modelled on that adopted during the Second World War, when Canada imposed a 100 per cent tax rate on "windfall" corporate profits.
The DPB report shows that large enterprises in the finance and insurance sectors saw their expected profits increase by 21.6% in 2020 and those in the manufacturing sector by 10.6%.
In absolute terms, large companies in the manufacturing and mining and oil and gas sectors achieved the highest windfall profits in calendar year 2020, earning $12.4 billion and $9.1 billion, respectively. Health care and social assistance, construction, finance and insurance together generated $14.9 billion in windfall profits. In total, corporate windfall profits reached almost $53 billion in 2020, the DPB estimates.
"large companies have received a lot of (public) support. We saw them take public money and then turn around and pay their shareholders or raise the salaries of their leaders, "said the leader of the New Democratic Party (NDP), Jagmeet Singh, who is calling for such a" pandemic profits tax. "
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To support SMEs
This tax would be temporary and could disappear when vaccination reaches a "certain" threshold, Singh told journalists on Tuesday. Additional tax revenues could be used to support SME owners who have been forced to close several times due to successive confinements.
Quebec businessman Mitch Garber was also proposing this winter to impose a special, temporary tax on businesses that sustained themselves during the pandemic, or perhaps even benefited from the crisis, in order to help entrepreneurs who suffered.
The NDP also proposed last year a tax on the wealth of families with a net worth of more than $20 million. The DPB estimated that this tax would apply to some 13,800 Canadian families and would have generated $5.6 billion in tax revenues for Ottawa in 2020-21.
In its 2021 budget, tabled on April 19, the Liberal government avoided announcing large tax increases: it introduced a tax on the purchase of luxury cars, boats, and personal aircraft, as well as a new tax on vacant foreign-owned housing.
Ottawa also plans to levy a 3% tax starting in January on foreign digital platforms such as Netflix, Amazon Prime and Airbnb. The Government expects to raise $2.7 billion of this tax over five years, or about $540 million per year.
Moreover, the DPB has not sought to assess the possible spillover effects of such a tax on windfall profits, but suggests that rules would be needed to avoid creative accounting. "we assume that additional measures (would be) put in place to prevent target companies from reducing their tax burden in 2020, for example by applying losses or shifting depreciation and depreciation from other years," the report states.
The surprising profitability of some companies throughout the pandemic should not be interpreted as evidence of "undue price increases" during the pandemic, the DPB warns. "
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