November 28 2024

A new Canadians for Tax Fairness report has revealed that during the height of the COVID-19 pandemic Canadian corporations collected $441 billion in excess profits. Most of that came from working people and their families and is a big part of the reason we are currently experiencing an affordability crisis.

The largest culprit was the oil and gas sector, which accounted for over half of excess profits. However, the financial, insurance and real estate sectors (FIRE) and the grocery sector also had significant impacts.

Excess profits tax and monopoly profits tax would discourage price gouging

An excess profits tax would remove some of the temptation for corporations to engage in price gouging. It would also provide much needed revenue to fund public services that help make life more affordable for Canadians. An excess profit tax could raise over $50 billion a year from publicly traded companies.

There is also a need to address the fact that corporate concentration in some sectors means that large corporations in those sectors have more power than they should to set prices. Solving this problem requires stronger competition legislation (with enforcement) and public provision of services where there are natural monopolies. However, a monopoly profits tax would help reduce the problem and generate $8 billion in revenue.

Taxing excess profits would help control inflation

In addition to making life less affordable for Canadians, excess profit taking by large corporations also contributes to inflation. We saw that during the recent rise in inflation, which started with companies taking advantage of the disruption caused by the COVID-19 pandemic to jack up prices.

Unlike increasing interest rates, which has little impact on price gouging, an excess profits tax is a way to attack the problem at its source. The corporations paying more would be the ones whose price increases were responsible for the latest round of inflation.