Tax group calls for windfall tax on companies that paid out dividends while receiving CEWS

According to Canadians for Tax Fairness, 37 companies spent billions on shareholder rewards while receiving government aid

Article content

A tax advocacy group is urging the Canadian government to impose a windfall tax on companies that enjoyed booming profits and payed out billions of dollars in dividends to shareholders while receiving pandemic subsidies.

Advertisement 2

Story continues below

Article content

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.

Article content

“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.

Advertisement 3

Story continues below

Article content

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.

Advertisement 4

Story continues below

Article content

While receiving government assistance over the past two quarters, the same companies paid out more than $5 billion in dividends, the Financial Post found.


  1. FP Investigation: As CEWS flowed in, dividends flowed out


  2. 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.

• Email: dpaglinawan@postmedia.com | Twitter:

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.