March 11, 2010
Analysis: Bank Profits and Corporate Tax CutsFrançais
The Bank of Nova Scotia became the last of the Big Five banks to report its profits for the first quarter of 2010. BNS posted a profit just short of a billion dollars – not bad for three months during a recession!
In total, the Big Five banks – BNS, RBC, BMO, CIBC, and TD Bank – earned more than $5 billion in Q1 of 2010. The 2010 tax rate on that income is 18%, 4.12 percentage points below what it was when Harper introduced his cuts in 2007.
Those cuts to date mean the Big Five will receive a quarterly bonus from other Canadian tax payers of more than $200 million. This is shaping up to be a year that will far surpass the excessive benefits the government bestowed on the banks last year – see below.
- The Harper Conservatives plan to cut corporate income taxes from 22.12% in 2006 to 15% in 2012, leaving Canada with the lowest corporate tax rates in the G8.
- By doing so, the Harper Conservatives have also deprived the Treasury of billions of dollars that could have been invested in Canadians, like lifting seniors and children out of poverty.
- Last year, with the corporate rate at 19% and most Canadians trying to cope with a serious recession, Canada’s Big Five banks had profits totalling $15.9 billion.
- In 2009, Harper’s tax cuts to that point (3.12%) fattened those profits by $496.1 million.
- No wonder the banks had enough money to pay enormous bonuses to their senior executives!
- The Government’s justification for cutting the income taxes on profitable businesses is that the cuts improve competitiveness, lead to investment, innovation and jobs. The evidence is almost entirely to the contrary.
- Across-the-board corporate income tax cuts are a completely ineffective way to grow an economy. They are the blunt weapon of a government without vision—they result in growing inequality, declining public services, and an economy that serves the market not people.
|Bank||1st Quarter 2009||2nd Quarter 2009||3rd Quarter 2009||4th Quarter 2009||Quarterly Total by Bank|
|TD Financial||$712 million||$852 million||$912 million||$3.12 billion||$5.6 billion|
|CIBC||147 million||($51 million)||$434 million||$644 million||$1.2 billion|
|Royal||$1.05 billion||($50 million)||$1.56 billion||1.23 billion||$3.8 billion|
|Scotia||$842 million||$872 million||$931 million||$902 million||$3.5 billion|
|Montreal||$225 million||$358 million||$557 million||$647 million||$1.8 billion|
|Total/Quarter||$2.97 billion||$1.98 billion||$4.4 billion||$6.54 billion||$15.9 billion|
(source: bank annual reports)
- While the Harper Conservatives have told Canadians to tighten their belts, the CEO’s of Canada’s big five banks saw pay increases of 10% in 2009.
- Bank of Nova Scotia CEO Richard Waugh was awarded the biggest increase, 29 percent, followed by William Downe of Bank of Montreal, at 25 percent. Waugh was paid $9.7 million in 2009, including salary, bonus and equity-linked compensation, while Downe’s compensation was $7.45 million.
- The highest-paid CEOs in Canada were Royal Bank of Canada’s Gordon Nixon and Toronto-Dominion Bank’s Edmund Clark, who were granted about $10.4 million
- Canadian Imperial Bank of Commerce paid CEO Gerald McCaughey $6.2 million (Bloomberg, March 5, 2010)