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Trudeau Liberal Finance Minister Freeland proposes to partially keep three of five election promises to close bank tax loopholes and stop gouging and abuse of bank customers

All five promises must be fully kept, and five other key measures enacted (some of which U.S. enacted decades ago), to ensure banks pay their fair share in taxes, and to stop bank gouging, discrimination and abuse

Big Six Banks gouged out record profits of $57.7 billion in 2021 – close to triple their 2010 profits, and higher than all similar banks worldwide

Tuesday, April 12, 2022

OTTAWA – Today, following the release last week of the federal government’s 2022 Budget, Democracy Watch called on the Trudeau Liberal Cabinet and Finance Minister Chrystia Freeland to include in the budget bill not only the three promised measures mentioned in the budget, but also the two other measures also promised in the last election, and called for by 120,000 voters who have signed on to Democracy Watch’s letter-writing campaign or petition.

The campaign also calls on Finance Minister Freeland to enact five other key measures to close bank tax loopholes, reign in excessive executive pay, and actually stop bank gouging, discrimination and abuse of customers (See Full List of Key Bank Accountability Changes). A recent national poll also showed 70% of Canadians want governments to take these kind of actions.

Canada’s Big 6 Banks reported, yet again, record-high 2021 annual profits totalling $57.7 billion, almost triple their 2010 profits, and double-digit hikes in their 2022 first-quarter profits, all reaped through gouging of their customers. Four of Canada’s Big 6 Banks are listed in the top 50 of Fortune’s Global 500 for 2021, and are the 17th (TD), 18th (RBC), 34th (Scotiabank) and 47th (BMO) most profitable financial institutions in the world, and are four of the five most profitable Canadian companies in the Global 500. Canada’s Big 6 Banks also paid their CEOs a total of $74.4 million in 2021 (an average of $12.4 million each) in salary and bonuses (55% higher than in 2008) – See Canada’s Big Banks Backgrounder.

The Budget proposed to enact the following measures which partially keep three of five promises made by the Liberals in the 2021 election:

  1. Impose a temporary excess profits tax on banks and insurance companies that earn more than $1 billion a year (of 15%, for one year only in 2022), and an increase in the annual tax rate for these companies of 1.5%) – the Liberals promised they would impose a higher 3% increase in the annual tax rate (England imposed a more than 8% tax hike on banks in 2011, and Australia increased the tax rate on banks in 2017);
  2. Review closing tax loopholes to prevent banks and other financial institutions from pretending to make their money in low-tax countries in order to lower the taxes they pay in Canada (the Liberals promised to close the tax loopholes, not just to review them); and;
  3. To establish and require all banks to use “single non-profit, external complaints body” (the Liberals promised a single ombudsperson “who has the power to impose binding arbitration”).

The Budget did not contain the following two other promised key bank accountability measures called for by 120,000 voters (all five promises were also listed in Minister Freeland’s mandate letter):

  1. Require financial institutions to offer options to delay consumer debt payments when needed, and;
  2. Empower the Financial Consumer Agency of Canada to “review the prices charged by banks and impose changes if they are excessive” (which must also include reviewing interest rates, as Australia did in 2017).

(See Backgrounder on Weak Enforcement of Financial Consumer and Investment Protection)

“As usual, the Trudeau Liberals spouted half-truths with their election promises, and are now proposing half-measures that only partially keep their promises, as Finance Minister Freeland continues to protect the big bank’s gouging profits and their executives’ multi-million salaries instead of making the changes needed to actually require the banks to pay their fair share of taxes, to stop the banks from paying their extra taxes by gouging 30 million bank customers even more, and also to effectively protect bank customers from discrimination and other abuses,” said Duff Conacher, Co-founder of Democracy Watch.

“Every dollar of excessive profit for the banks, and every person and business the banks unjustifiably refuse to loan to, costs the Canadian economy because it means that the banks are overcharging for their essential services and loans, and choking off job creation and spending,” said Conacher.

The following additional five key measures are needed to actually stop gouging and abuse, to stop discrimination in bank lending and service, and ensure the banks serve everyone across Canada fairly and well at fair prices and interest rates (See the Full List of Key Bank Accountability Changes):

  1. Require banks and insurance companies to promote a national financial consumer organization, and a national individual investor organization (as recommended in 1998 by the Liberal-controlled MacKay Task Force, House Finance and Senate Banking committees);
  2. Require the banks to disclose detailed information annually about their lending and service records (as the U.S. has required banks to do for 30 years, including the U.S. banks that 4 of Canada’s Big 6 Banks own), categorized by race, gender, income level and neighbourhood, and require corrective action whenever banks discriminate against customers;
  3. Require every bank to have basic branches in every neighbourhood (including through partnering with Canada Post outlets for postal banking, as TD has started to do);
  4. Require the Financial Consumer Agency of Canada (FCAC) to do unannounced, mystery-shopper audits to find violations of consumer protection laws, and to identify all violators and fine them a minimum of $1 million up to a maximum of $50 million, and;
  5. Require the Big Banks and other financial institutions to cut the pay of their CEO and other top executives to no more than 40 times their lowest paid employee (as in some European countries).

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Duff Conacher, Co-founder of Democracy Watch
Tel: (613) 241-5179
Cell: 416-546-3443
Email: [email protected]

Democracy Watch’s Big Banks Coronavirus Accountability Campaign