Banking Exchange Magazine Logo

The Impact of Trudeau’s Planned Bank Tax Increase

Proposed bank and insurer tax could net nearly C$11 billion for the government if the Liberal Party wins September election

  • |
  • Written by  Banking Exchange staff
  • |
  • Comments:   DISQUS_COMMENTS
The Impact of Trudeau’s Planned Bank Tax Increase

Canadian prime minister’s Justin Trudeau’s plan to tax the country’s banks an additional US$8.6 billion will negatively affect the companies’ financial position, according to Moody’s.

Trudeau announced the plan late last week to raise the corporate tax rate for banks and insurers from 15% to 18%.

Documents released yesterday (September 1) and reported by Bloomberg showed that the tax increase would generate an additional C$10.8 billion (US$8.6 billion), including approximately C$5.5billion from a “Canada Recovery Dividend” temporary tax.

In an analyst’s note published this week, credit rating agency Moody’s said the tax increase – which would be introduced if Trudeau’s Liberal Party win September’s election – would be “credit negative for the six domestic systemically important banks and four large insurers” it rates.

The agency explained that the move would “reduce their future earnings and dampen their ability to internally generate capital”.

“The cost of the increased taxes would likely be passed on to clients through higher banking fees or insurance product pricing, as well as higher rates on loans such as mortgages,” the Moody’s analysts said. “For banks and insurers, a decline in earnings may erode their capital levels, some of which is already earmarked for shareholder returns.”

Canadian banks have been preparing to increase dividends and share buybacks in anticipation of the lifting of pandemic-induced restrictions on payouts.

In a statement last week, the Canadian Bankers Association said highlighted its members’ contribution to the economy through their existing tax bills and shareholder payouts to Canadian investors. It also highlighted mortgage relief and fee waivers granted to individuals and small businesses during the pandemic.

back to top


About Us

Connect With Us


Webinar — Leveraging Open Banking Trends to Transform Your Institution

Time/Date: October 5th, 2:00 CT

The concept of open banking is ushering in exciting new possibilities for financial institutions of all sizes, transforming how they do business and driving new revenue opportunities. Join Shane Ferrell, Vice President of Product Strategy and Director of Software Engineering Barkley Hughes as they answer these questions and more: 

• What is open banking, and how does a financial institution take full advantage of this rapidly growing technology?

• What are key areas to look for when considering leveraging a third-party technology or an open banking marketplace?

• What role does FDX play in the future of open banking?


This webinar is brought to you by:
OneSpan logo