NEWS

Budget 'mistake' more than doubles tax on credit unions

08/27/2013 10:49 EDT | Updated 10/27/2013 05:12 EDT
The NDP is calling on Finance Minister Jim Flaherty to acknowledge a mistake in last spring's federal budget that more than doubled the corporate tax rate for credit unions and bring in a fix immediately.

The government had signalled it was raising the tax rate for credit unions and caisses populaires to 15 per cent from 11 per cent, to bring them in line with Canadian banks.

But a recent Deloitte report found the budget implementation bill passed in the spring will effectively raise the credit unions' tax rate to 28 per cent over the next five years. Deloitte's report said the increase was due to a "technical deficiency" in the budget legislation and that the Finance Department was working to correct it.

"However, our contacts would not provide any assurance that the legislative fix would be enacted prior to the end of 2013 or whether the fix would be retroactive to budget day. Any legislative change is subject to parliamentary approval," the Deloitte report said.

NDP finance critic Peggy Nash said the government needs to address the error imediately.

"We've not heard from the finance minister on how he is going to fix this, we haven't even heard him acknowlege it," Nash said at a press conference in Ottawa Tuesday.

Nash said if the increase was an error, it shows the danger of using omnibus bills to push through a raft of legislative changes and avoid debate.

"If it isn't a mistake, it is a massive penalty on Canada's credit unions," Nash said.

Nash said the NDP was opposed to the planned increase of four per cent, to be phased in over five years, because many credit unions are not-for-profit or serve a particular role in a community and higher taxes could hinder their ability to fulfill that role. She said some credit unions might not even be aware of the accidental tax hike.

Asked if the NDP would support a fix if the government brings one forward, Nash pointed to the dificulty posed by prorogation, which has delayed the return of Parliament until at least mid-October.

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