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Credit unions not banks and should not be taxed like them
I’m a proud member of many different co-operatives and I bank at a credit union.
That’s why I was so dismayed when the Conservatives announced they would eliminate the small business tax rate for credit unions in the last federal budget.
The federal government said it wanted to level the playing field between Canada’s big banks and credit unions — ignoring the fact credit unions have a different mandate than the big banks.
A technical amendment in the Budget Implementation Act, C-60 changes the definition of which income is eligible for a rate reduction but only for credit unions.
If the amendment is not changed by 2017, credit unions will have to pay the increased tax rate on 100 percent of their income while banks enjoy a reduced rate on a percentage of their income.
In real terms, this means the federal tax burden on credit unions will double over the next five years. That doesn’t seem like a level playing field to me.
Credit unions agree and they have brought forward a proposal to parliamentarians to change that technical amendment to one that would actually provide a fair and neutral financial system.
They called it a Credit Union Investment Tax Credit.
It would focus on retained earnings, not shares. There would be size thresholds so that large financial institutions would not qualify. And it is a simple calculation that should be easily verifiable by outside auditors.
The proposal is for a five percent credit on the increase in retained earnings from the previous year.
But, the institution’s taxable income must be less than $100 million and taxable capital less than $1 billion.
If either income or capital is greater than those amounts, the amount of tax credit would be reduced and would go to zero once taxable income reached $150 million and when taxable credit reached $4 billion.
Credit unions are important resources for people in small markets where banks can’t be bothered opening a branch. Their strong focus on community economic development is an important driver for the sustainability of businesses.
It is too early to know if the minister of finance will agree with this proposal and make the necessary change to ensure a fair playing field for credit unions.
If you want to add your voice, you can email him at email@example.com or send a letter postage-free to him at House of Commons, Ottawa, K1A 0A6.
Jean Crowder is the NDP MP for Nanaimo-Cowichan.