Canada’s banking group says government ‘picking on’ financial sector #CanadaFinance

(Reuters) – A top lobbying group for the Canadian banking industry slammed the federal government’s proposals to levy huge taxes on the country’s financial sector and said the policy could hurt lending, The Globe and Mail reported on Tuesday.

The Canadian Bankers Association’s (CBA) CEO Anthony Ostler said the government was “singling out the banks”.

“Picking on a sector that is the core to supporting the growth and long-term health of the economy is doubly detrimental,” Ostler said, according to the report.

The financial industry has been on the hook for taxes as the federal government looks to boost spending to help lower-income Canadians cope with inflation and step up clean technology investments to close the competitive gap with the United States.

Last year, the government introduced the Canada Recovery Dividend, a one-time tax on banks and life insurers estimated to generate more than C$3.02 billion ($2.23 billion) over five years, according to the Office of the Parliamentary Budget Officer.

In this year’s budget, the government also proposed to treat dividends received by financial institutions from Canadian shares as business income, which could increase their overall tax burden.

“Prior to implementing the Canada Recovery Dividend and the Additional Tax on Banks and Life Insurers (a separate tax measure), the Department of Finance invited Canadians and stakeholders — including these financial institutions — to provide feedback on the proposed legislation,” the press secretary for the Office of the Deputy Prime Minister and Minister of Finance said.

“They will similarly be asked in the coming months to participate in the public consultations on the additional tax measures announced in this year’s budget,” the spokesperson added.

Analysts have warned that banks could look to soften some of the tax hits by tightening lending standards and slashing their headcounts, which could add more risk to an uncertain economic climate.

A spokesperson for CBA, which represents around 65 banks in Canada, had no additional comment.

($1 = 1.3557 Canadian dollars)

(Reporting by Niket Nishant in Bengaluru; Editing by Krishna Chandra Eluri)