Jagmeet Singh wants to tax companies making big profits during COVID

Authored by ipolitics.ca and submitted by yogthos

The NDP is reviving a wartime-era idea by demanding the federal government tax companies’ excess profits during a time of emergency — in this case, the COVID-19 pandemic.

Federal NDP Leader Jagmeet Singh told reporters in Ottawa on Thursday that his party wants the Liberals to introduce a new tax on companies that have profited significantly from the pandemic.

Singh specifically mentioned e-commerce giant Amazon, whose profits have soared as more consumers do more of their shopping online, as well as large grocery companies that have benefited from the trend to buy more food to cook and eat at home. Their success has been in sharp contrast to smaller and seasonal businesses that have suffered the most damage from COVID-19.

“We know there’s been massive profits enjoyed by certain companies,” Singh said. “They need to pay their fair share. The ultra-wealthy should be the ones that pay for the recovery, not us, not families, not those that are struggling.”

The measure Singh is proposing was enacted in Canada, Great Britain, and the United States during the First and Second World Wars.

How it worked is the government set a “normal” rate of return on profits that would be exempt from a steep corporate income tax rate. That normal rate would likely be based on average profits over a recent period, and any profits above the rate would be subject to high rates.

Canada applied a tax rate of 75 per cent on excess profits during the Second World War, which was later increased to 100 per cent, albeit with a 20 per cent post-war rebate, according to a recent article by Alex Hemingway, an economist with the Canada Centre for Policy Alternatives (CCPA).

Singh said his party will ask the Parliamentary Budget Office to help craft the best formula for an excess-profits tax, but that the rate paid should be at least double the current general corporate tax rate of 15 per cent. If enacted, the tax would be the first for any country during the pandemic.

READ MORE: Federal poll finds few Canadians believe wealthy and corporations pay fair share of taxes

Asked about the proposal in question period on Thursday, Prime Minister Justin Trudeau did not offer an opinion, instead noting his government’s 2016 effort to increase personal income taxes for Canada’s top one per cent, which the NDP voted against.

However, the Liberals promised in their speech from the throne to “identify additional ways to tax extreme wealth inequality, including by concluding work to limit the stock-option deduction for wealthy individuals at large, established corporations, and addressing corporate tax avoidance by digital giants.”

The NDP is calling for more, including a one per cent tax on net wealth exceeding $20 million. After securing changes to sick leave last week, the party is focusing its next efforts in the minority Parliament on policies against wealth inequality.

Singh said Thursday that Canada is experiencing a “K-shaped” recovery: a divergence in the path of wealthy Canadians from that of Canadians who’ve been disadvantaged by the pandemic.

“If we want to stop that recovery that’s benefiting massively those at the very top and hurting anyone else, we need to put in place clear measures that will stop that, that will actually lift up people,” Singh said, referring to his wealth-tax proposals.

Toby Sanger, director of Canadians for Tax Fairness, said the idea of taxing excess profits during the pandemic is picking up steam among policy experts around the world.

Sanger, who wrote a chapter of the CCPA’s recommendations for a pandemic recovery in July, which included a tax on corporate profits above 7.5 per cent, said there’s “certainly a potential for considerable revenues” from the measure. He said that, during the Second World War, Canada generated roughly $1.6 billion in revenues through the tax, no small figure for the time.

“It’s a proposal that I think the Liberals should take seriously,” he said.

Elliot Hughes, a former tax policy adviser to former finance minister Bill Morneau, cautioned that such a proposal has to keep in mind which types of companies pay high taxes.

“What about the PPE (personal protective equipment) company from Windsor that’s been making PPE for nurses in long-term care homes?” he said.

Hughes, now a senior adviser at Summa Strategies, said while he’d be surprised if the Liberals were contemplating an excess-profits tax, it’s politically smart for Singh to suggest it, because wealth inequality is emerging as a pressing topic during the pandemic, while public support for making the rich pay more is always strong.

“This is fertile ground for Jagmeet Singh,” he said.

An excess-profits tax was also endorsed by Alex Himelfarb, a former clerk of the Privy Council. He co-authored an article in Policy Options this week that said the tax should be introduced “in recognition of the fact that while many at the bottom of the income scale paid a huge price as a result of COVID-19, some companies were making enormous profits during the crisis.”

This story was last updated on Oct. 9 at 3:56 p.m.

jiebyjiebs on October 9th, 2020 at 22:40 UTC »

There is an alarming amount of people in here that don't understand the difference between small business tax and corporate tax.

Doctor_Amazo on October 9th, 2020 at 21:02 UTC »

Tax the fuck out of companies like Amazon.

Also... now that public education is being done online, we need to talk about making the internet a public utility. A good first step in that direction is allowing parents with children registered in virtual learning to deduct a portion of their internet bill for their taxes.

The1stCitizenOfTheIn on October 9th, 2020 at 17:31 UTC »

The proposal New Democrats are asking for was one enacted in Canada, Great Britain and the United States during the First and Second World Wars.

How it worked is the government set a “normal” rate of return on profits that would be exempt from a steep corporate income tax rate. That normal rate of return would likely be set based on average profits over a recent period, and any profits above the rate would be subject to high rates.

Canada applied a tax rate of 75 per cent on excess profits during the Second World War, which was later increased to 100 per cent, albeit with a 20 per cent post-war rebate, according to a recent article by Alex Hemingway, an economist with the Canada Centre for Policy Alternatives (CCPA).

Singh said his party will ask the parliamentary budget office to help craft the best formula for an excess profit tax but that the rate paid should be at least double the current general corporate tax rate of 15 per cent. If enacted, the tax would be the first for any country during the pandemic.

The NDP is calling for more, including a one per cent tax on net wealth exceeding $20 million.

An excess profits tax was also endorsed by Alex Himelfarb, a former Clerk of the Privy Council. He co-authored an article in Policy Options this week that said it should be introduced “in recognition of the fact that while many at the bottom of the income-scale paid a huge price as a result of COVID-19, some companies were making enormous profits during the crisis.”