Opinion: Freeland's new hidden tax on everything and everyone

financialpost.com:

Tucked into the 500-page Notice of Ways and Means Motion Finance Minister Chrystia Freeland released last month is an insidious measure that urgently needs to be withdrawn. First announced as part of Budget 2023, it imposes an additional $3 billion of federal income tax on “financial institutions” over the next five years. We all know how popular financial institutions are. A tax imposed on big banks and insurance companies will appeal to many people. But who really will pay this tax is: everyone — despite the government’s cynical attempt to try to convince us all that someone else will ultimately bear its burden.

It is a fundamental principle of Canadian income taxation that corporate profits should be taxed only once at the corporate level, which is why dividends paid from those after-tax profits by one corporation to another are normally not taxed again in the recipient corporation. That would be double taxation of the same corporate profits, which is both unfair and inefficient.

The technical mechanism for eliminating this form of double taxation is the “dividends received deduction.” It works like this: Corporation A earns $100 of profits and pays tax on them of $25. It then pays a dividend of $75 out of its after-tax profits. If the dividend is paid to Corporation B, there is no additional corporate tax on the dividend: Corporation B claims the “dividends received deduction.”

If there were no such deduction, Corporation B would have taxable income of $75, and thus a tax liability of $18.75. If it then paid its after-tax profits (i.e., $75 – $18.75 = $56.25) as a dividend to Corporation C, then Corporation C would have taxable income of that amount, and a third (yes, third!) layer of corporate tax would arise, equal