TORONTO, March 21, 2013 /CNW/ - Canada's credit unions were disappointed
to see that today's federal budget increases taxes for credit unions
and caisses populaires in 2013 and in future years. A tax provision
designed to help credit unions compete with big banks will be
"We were surprised that Budget 2013 targets credit unions in this way,"
said Gary Rogers, Vice President, Financial Policy with Credit Union
Central of Canada. "The Income Tax Act is no stranger to a myriad of tax incentives and credits, including
many introduced by the current government. In the absence of a
comprehensive review and widespread reduction of tax expenditures, it
is curious that one specific to credit unions has been terminated."
Credit unions first became taxable in 1971. Tax rules implemented at
that time recognized that credit unions are unlike their competitors.
They are "the small business of financial institutions". Credit unions
do not have access to capital markets to issue shares; they incur
higher costs to operate in small underserved markets; and they provide
social benefits different from big banks, especially in serving small
communities across Canada. Governments have wanted to ensure there was
a strong, competitive second tier of financial service providers.
Those reasons continue to be valid today.
The Government of Canada's Annual Tax Expenditures report shows that the
cost to the treasury of this tax incentive has been decreasing over a
period of years. In the most recent year, 2012, it was projected to be
These changes will be phased in over 5 years. Not all credit unions are
impacted equally. Some have grown their retained earnings beyond the
threshold for accessing this tax reduction and will see no change.
Some very small credit unions may continue to access the lower tax rate
through the conventional small business tax rate regime. But most
credit unions will experience tax increases.
Rogers noted, "It is ironic that today's budget states the Government
will ensure that it promotes the entry and growth of smaller financial
institutions (page 147), while imposing this new tax cost on credit unions."
Credit Union Central of Canada is in the process of consulting with the
credit union system, including its Board of Directors, to assess the
impact on the credit union system and our next steps in response to
today's unexpected announcement.
About Credit Union Central of Canada (Canadian Central)
Credit Union Central of Canada is the national trade association for the
Canadian credit union system. Canada's credit union system is a vital
competitor in the financial services industry. Canadian Central
represents five provincial/regional Centrals and one Federation
representing 348 credit unions with more than $152.5 billion in assets
and serving over 5.3 million members, outside of Quebec. For more
information about Canada's credit union system and Canadian Central
For the eighth consecutive year, Canadians ranked credit unions first in
overall Customer Service Excellence, among all financial institutions,
surpassing all Canadian banks in Ipsos 2012 Best Banking Awards. Credit
unions also took sole honours in Branch Service Excellence and Values
My Business. Credit unions tied for first among all financial
institutions for Financial Planning & Advice and Telephone Banking
SOURCE: Credit Union Central of Canada
For further information:
Veronica Feldcamp, Director, Trade Association Services
416-232-3417 or email@example.com