Ottawa (07 April 2022) — A new report from Canadians for Tax Fairness, The Rise of Corporate Profits in the Time of COVID, shows that the profit margins for Canadian corporations rose to record levels in 2021. This is contributing to inflation and income inequality.
Banks, insurance companies and real estate companies had 22% profit margins
Profit margins in 2021 exceeded 20-year averages for corporations in all of Canada’s major economic sectors, the report showed. Last year’s profit margins averaged 16% overall, with an average of 22% for the finance/insurance/real estate sector.
Effective combined corporate tax rate at an all-time low
These profits come at a time when the effective average combined federal-provincial corporate tax rate hit an all-time low of just 16.6%.
“The government can’t justify maintaining ultra-low tax rates when these companies are making record profits and inflating prices for our basic necessities,” said the report's author, Dr. DT Cochrane. “It’s time to rein in corporate profits with fair taxation.”
Report calls for excess profits tax and closing loopholes
The report calls on the government to tax the excess profits of corporations in all sectors and close loopholes, like the 50% tax rate reduction for capital gains income, that allow large corporations and the wealthy to avoid paying their share in tax. There are also recommendations to increase the federal corporate income tax rate from 15% to 20% and to require transnational companies to be transparent about their earnings and taxes paid.
“Budget 2022 is a chance to address inequality and inflation by rebalancing our tax system so the richest corporations pay more of their fair share,” said Dr. Cochrane. “Canadians across political lines overwhelmingly support fairer taxes, and those with less should not be paying for record profit margins that benefit those with the most.”
Time for the wealthy and large corporations to do their share
During the COVID-19 pandemic it was low- and middle-income Canadians who were called upon to make the greatest sacrifices. People with modest incomes were the most likely to be laid off. The overwhelming majority of essential workers, who had to keep working outside the home, regardless of the danger, were low- and middle-income earners.
In contrast, the wealthy and many large corporations became wealthier than ever. Most wealthy individuals were able to work from home. And even when the pandemic did affect them, the impact was often less.
After the sacrifices that low- and middle-income Canadians made, it is only fair that Budget 2022 ensures large corporations and the wealthy do their share.