Call for windfall tax on CEWS companies that paid out dividends
According to Canadians for Tax Fairness, 37 companies spent billions on shareholder rewards while receiving government aid
A tax advocacy group is urging the Canadian government to impose a windfall tax on companies that enjoyed booming profits and paid out billions of dollars in dividends to shareholders while receiving pandemic subsidies.
The report released by Canadians for Tax Fairness on Feb. 9 said having a windfall profits tax and a minimum book profits tax, which the United States recently introduced to limit corporate tax avoidance, would be called for.
“The Canada Emergency Wage Subsidy (CEWS) was supposed to help businesses retain employees — not pad the profits of large corporations and shareholders,” the report’s author, DT (Troy) Cochrane, said in a press release.
The wage subsidy was introduced in April 2020 to help companies with significant revenue declines cover payroll costs and avoid laying off workers.
For its report, Canadians for Tax Fairness looked at 74 companies that it found in a previous, October 2022 report to have a tax gap — which it described as the difference between how much a taxpayer actually pays in tax and how much they would pay at the statutory tax rate — of more than $100 million.
The organization said half of these companies received CEWS.
Those 37 CEWS recipients spent a combined $81.3 billion on dividends, $41.1 billion on share buybacks and $51.1 billion on acquisitions in 2020 and 2021, according to the report.
The group said they also found that most of the companies that received wage subsidies actually reduced their overall employment in 2020 and almost half still had employment in 2021 that was lower than in 2019.
In late 2020, a Financial Post investigation found at least 68 publicly traded Canadian companies continued to pay out billions of dollars in dividends while receiving at least $1.03 billion of government assistance in the form of the Canada Emergency Wage Subsidy. Of those 68 companies, 11 either introduced a dividend or hiked existing dividends in the quarters that they received CEWS.
While receiving government assistance over the past two quarters, the same companies paid out more than $5 billion in dividends, the Financial Post found.
FP Investigation: As CEWS flowed in, dividends flowed out
Kevin Carmichael: A subsidy that is hard to resist, and sometimes harder to justify
Asked why dividend-paying companies were still allowed to receive CEWS, a Ministry of Finance spokesperson told the Financial Post in 2020 that the government’s “top priority is supporting Canadian families and workers,” while also adding that the “wage subsidy can only be claimed for employee remuneration.”
The companies that spoke to the Post at the time said there was no correlation between the money they received in CEWS and the money they paid out in dividends, and that the latter was entirely funded by either operations or debt.
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