Sask. credit unions face higher tax bills
SaskCentral says tough decisions ahead for members, communities
Credit unions in Saskatchewan say a change to federal tax laws now lumps them in with Canada's chartered banks.
If the province follows suit, SaskCentral CEO Keith Nixon said it would nearly triple the taxes credit unions pay.
"By paying more tax, credit unions will have less income to be able contribute to building capital and retained earnings that's necessary for growth," Nixon said. "There will be less income that's available for distribution to memberships."
More than half a million people in Saskatchewan belong to a credit union.
The changes will be phased in over the next five years. Federal changes alone mean $2.6 million more in taxes paid by Saskatchewan credit unions. If the province follows, it would mean a total of $10.2 million more in taxes.
Up until the 1970s, credit unions didn't pay any taxes at all.
Top five biggest credit unions in Sask.
Based on total assets and members
"Credit unions are resilient and they will find a way of working through this," Nixon said. "Make no mistake, credit unions are among the strongest financial institutions in the country. But it's their small nature of business that we want that fair treatment continued."
Saskatchewan Conservative MP Tom Lukiwski said the federal government gave credit unions a subsidy back in the 1970s to make up for the fact they couldn't make up for the small business tax rate. Now, the government is cutting the subsidy.
"Credit unions are still eligible for the small business deduction on the first $500,000 of income," Lukiwski said. "On income in excess of that, they will now be subject to the federal tax rate of 15 per cent which is on par with other corporations in Canada."
Lukiwski said credit unions are enjoying a marked increase in market share.
"The main thing is that removal of the subsidy, that seems to be what the credit unions are complaining about more than anything else."
Lukiwski added that the government is treating credit unions as fairly as any other corporation in Canada.
"I think frankly it would be interesting to see whether or not most Canadians would consider, given the size of many of the credit unions now and their expansion over the past number of years, whether they'd consider them to be a small business, in the same vein as most of the small businesses that you and I are aware of in Saskatchewan," Lukiwski said.
Regina Liberal MP Ralph Goodale calls it a 'regressive' move.
"It makes it more difficult for them to lend money to farmers and small businesses and home mortgages and so forth," Goodale said. "It's entirely unnecessary and unjustifiable."