This is how much the Big Six banks would have to pay if Trudeau’s tax goes through

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The Liberal Party is vowing to target bank and life insurance profits with a three per cent surtax on profits over $1 billion, a move they expect will free up an additional $2.5 billion a year in government revenue over the next four years starting from 2022.

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Given the sizeable earnings the Canadian banks reported this week, the Big Six could end up contributing a significant amount to government coffers under the plan. But just how much would each bank be forced to pay?

Royal Bank of Canada (RBC), which has reported year-to-date adjusted net income of roughly $12.2 billion, would likely pay the most. Though taxable income and reported income are not necessarily the same, an approximate calculation based on $11.2 billion in income above the threshold would see RBC forking over an additional $334.7 million on this year’s earnings so far.

Using this same methodology, Toronto-Dominion Bank would have to pay $285.5 million on their year-to-date net income, the Bank of Nova Scotia (Scotiabank) could be paying the government approximately $191.9 million, the Bank of Montreal would owe about $137.9 million, the Canadian Imperial Bank of Commerce (CIBC)’s surtax proceeds would amount to around $120.2 million, and National Bank would pay out around $42.0 million.

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And that’s only through three quarters of fiscal 2021.

For the last full fiscal year — the pandemic stricken 2020, where earnings came under pressure — data from Bloomberg shows that Canada’s Big Six banks still earned between $2 billion and $12 billion in unadjusted net income. Based on the same methodology described above, calculations from Financial Post suggest TD would have paid the most at $326.9 million.

The Canadian Bankers Association yesterday criticized the Liberal plan for singling out financial services.

“The proposed tax increase would reduce income that would otherwise benefit the majority of Canadians who are bank shareholders, either directly through share ownership or indirectly through pension and mutual funds, including the Canada Pension Plan,” the Canadian Bankers Association said in a statement, adding that pension funds and RRSPs are some of the main beneficiaries of the billions of dollars that the banks pay in dividends each year.

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On Tuesday, the Canadian Labour Congress issued a report which advocated for higher taxes among high-earning corporations and wealthy Canadians as well as for the government to close tax loopholes, hoping to free up over $90 billion annually to address wealth inequalities.

— With additional reporting by Barbara Shecter

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