Wednesday, December 17, 2008

Cut Tax or Risk Jobs, Banks Say

(Rita Trichur — Toronto Star)

Canada’s banks have issued a veiled warning to the government of Ontario – cut corporate taxes or risk losing high-paying financial sector jobs to other jurisdictions.

The Canadian Bankers Association – which represents 51 domestic and foreign banks – is telling Ontario in a carefully worded pre-budget submission to cut corporate taxes in its next budget. It argues that tax cuts are necessary to boost the province’s productivity, which is key to preserving a high standard of living and “a large number of high-quality, high-paying jobs.”

The association is asking Queen’s Park to reduce its corporate income tax rate to 10 per cent from its current level of 14 per cent. Given her druthers, president and chief executive officer Nancy Hughes Anthony would like the province to take action in next spring’s budget. If that’s not achievable because of the deepening recession, she says Ontario should at least formulate a long-term plan to achieve that goal.

“The difficulty we’ve had is we’ve heard from the premier, in particular, that `there is no way we are going to reduce taxes. And that’s it, that’s all,’” Hughes Anthony said in an interview yesterday.

“In terms of investment and businesses looking at coming into Ontario or staying in Ontario, making sure there’s all those jobs there and all that – that’s not a great message.”

Lobbying for corporate tax cuts is likely to prove a tough sell.

Ottawa has already given the banks a financial helping hand by agreeing to buy up as much as $75 billion in mortgages and backstop more than $200 billion in interbank loans.

Consumers are also smarting from a decision last week to pass on only part of a Bank of Canada interest rate cut. Some banks have also raised rates for credit card customers who are late in paying their bills. Read more here.