To the Editor:
Credit Unions have always been crucial to the commercial success and community strength of my home province of Saskatchewan, and the same is true right across Canada. They provide high-calibre financial services and valuable choice in the marketplace.
Because they are locally-owned by their members and have a customer-service business model, Credit Unions also provide a range of services in places and to population groups that large commercial banks would never reach.
Over 11-million Canadians are Credit Union members, including half of Saskatchewan's total population. In addition to the extensive "caisse populaire" system spanning Quebec and parts of Ontario and New Brunswick, there are 348 Credit Unions, large and small, across the country operating at 1,762 locations. The largest is "Vancity" on the west coast. "Conexus" in Regina is Number-6.
For 40 years, Credit Unions have been taxed on their income as small businesses. This preferential tax rate recognizes that even the largest Credit Union is 16-times smaller than the smallest of Canada's five Big Banks. Those five banks dominate 90 per cent of the Canadian banking sector.
A lower tax rate for Credit Unions also acknowledges their local, community-based ownership and the fact that their only source of capital is their members and customers, whereas the banks raise large volumes of capital on public markets. The first obligation of the banks is to their shareholders. The first duty of Credit Unions is to their members.
That's all to the good, but here's the bad news:
Buried deep in Stephen Harper's 2013 budget, now being forced through the Senate, the income tax system for Credit Unions is being changed - to treat them more like Big Banks. This constitutes a massive Conservative tax increase, and a big hit on the retained earnings which Credit Unions use to grow, lend money to small businesses and farmers, and fund community development. Competition and customer service will inevitably be impaired.
The timing couldn't be worse because this tax grab comes just when Credit Unions, like all financial institutions, are grappling with more stringent capital rules imposed on the whole industry in the wake of bank failures during the recent recession. There was no consultation whatsoever. This tax hike is entirely unilateral.
It's driven by the Harper government's political "need" to concoct the illusion of a "balanced budget" by 2015.
That's why Credit Unions are being slapped with this new tax burden of about $75-million every year. That's also why taxes on small business owners are going up by some $550-million per year, and tariff-taxes on consumer goods are going up by $333-million per year, and EI payroll taxes are going up by more than $600-million per year.
Altogether, it's massive. It's also counterproductive and fundamentally dishonest.
Ralph Goodale, MP, Wascana, SK.
