17 December 2008

Cut tax or risk jobs, banks say

The following article is excerpted from the 17 December 2008 edition of the “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….

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. …

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.

Still, banks are a major employer, providing jobs to about 144,000 Ontarians. But shrinking profits have already caused banks and other financial firms to slash hundreds of positions. Analysts are predicting more layoffs in 2009. …

Despite the financial crisis, advocates say the sector remains an important driver of economic growth given that Toronto is the third-largest financial centre in North America. Still, the Toronto Financial Services Alliance has warned the House of Commons finance committee not to take that for granted because "financial services are very footloose." …