OTTAWA (8/29/13)--Canada's Finance Department says it will fix a technical error in the government's budget bill that would have resulted in Canadian credit unions seeing a 13 percentage point increase in tax rates--higher than those paid by banks and other corporations.
Sweeping amendments passed by Canadian legislators in June in reforming its tax system had included a measure that would require credit unions and similar small lending institutions to pay the same tax rates as other corporations--which was a surprise to Canada's credit unions (Victoria Times Colonist Aug. 28 and The Canadian Press Aug. 27).
Originally the changes--introduced in an omnibus budget bill that incorporated multiple changes--increased the tax rate paid by most credit unions and caisses populaires to 15% on income in excess of the small business limit, from a federal rate of 11%. But auditing firm Deloitte said the technical error in the legislation, if not corrected, would subject credit unions to double that amount.
Finance Minister Jim Flaherty's office said he is committed to fixing the technical glitch as soon as possible and will ensure no credit union is disadvantaged by the issue.
The March budget "blindsided" credit unions, said the Credit Union Central of Canada, which estimated taxing credit unions would cost $28 million annually. Credit Union Central said it is working to convince the government that the wording in the budget document that had indicated a tax increase would restore neutrality and fairness "probably doesn't achieve that goal."