The federal budget released yesterday has eliminated a tax provision designed to allow credit unions to compete with big banks, according to Credit Union Central of Canada.
Credit unions are currently eligible for the small business deduction on the same basis as other Canadian-controlled private organizations. They are also eligible for an additional deduction that allows for a preferential income tax rate on that income that is not covered by the small business deduction.
The Economic Action Plan 2013 states that this additional deduction will be phased out over five years.
“We were surprised that Budget 2013 targets credit unions in this way,” Credit Union Central vice-president, financial policy, Gary Rogers. “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.”
Bill Maurin, CFO and acting CEO of Ontario credit union Meridian, agrees: “Canadians want and need a viable alternative to the traditional banks. For more than a century, the country's credit unions have fulfilled that need.
“By reversing this important and longstanding deduction for credit unions, the government will significantly diminish consumer choice for Canadians.”
