As published on advisor.ca, Wednesday 1 September, 2021.
A re-elected Liberal government would impose a 15% minimum tax on Canada’s highest earners, limiting their ability to reduce what they pay through tax planning.
The Liberal’s fully costed platform included a number of tax measures focused on wealthy companies and individuals, and measures to strengthen consumers’ protection from financial institutions.
While the Liberals had already announced policies around housing and taxing profits for large financial institutions, they only released their full platform for the Sept. 20 election on Wednesday, a couple of weeks after the Conservatives and the NDP.
The Liberals’ minimum tax rule would ensure that top earners (those earning more than $216,511 in 2021) pay at least 15% tax each year, the same rate as those earning less than $49,000.
Canada already has an alternative minimum tax, which limits the tax deduction available from certain incentives.
The tax rate on income above $216,511 is 33%. The Liberals’ minimum tax would remove high earners’ “ability to artificially pay no tax through excessive use of deductions and credits,” the platform said. The tax would raise $1.7 billion over five years, according to the party’s projections.
The proposal fell within a section of the platform dedicated to “a fair tax system.” Other measures included the higher corporate tax rate for banks and insurers on profits above $1 billion announced last week, and the luxury tax on expensive vehicles proposed in the 2019 campaign but never implemented.
The Liberals would also increase Canada Revenue Agency resources by up to $1 billion per year to combat “aggressive tax planning and tax avoidance” and close the tax gap. (The NDP also pledged to boost funding for the CRA, but did not provide a figure.)
The tax on bank and insurer profits wasn’t the only Liberal measure targeting financial institutions.
The Liberals pledged to establish “a single, independent ombudsperson for handling consumer complaints involving banks, with the power to impose binding arbitration.”
The Ombudsman for Banking Services and Investments (OBSI) has lost relevance as large banks have set up their own dispute resolution services. While OBSI still handles disputes related to investments, it has no power to enforce its compensation recommendations, something that has frustrated investor advocates for years.
The Liberals also said they would enhance the Financial Consumer Agency of Canada’s power to review the fees charged by banks “and impose changes if they are excessive,” and move forward with a plan to launch open banking in 2023.
The Conservative platform also featured measures aimed at financial institutions. The Tories pledged more transparency on investment management fees and called on the Competition Bureau to investigate bank fees.
The Liberal platform includes about $78 billion in new spending over the next five years and around $25.5 billion in new revenue. Using the Parliamentary Budget Office’s August projections, the Liberals forecast the $156.9-billion deficit in 2021–22 falling to just over $32 billion in 2025–26, with the debt-to-GDP ratio declining from 48.5% to 46.5% over the same period.
The platform also features a $15-billion risk adjustment fund for Covid.
Other measures in the Liberal platform include: