CREDIT UNIONS ‘DISAPPOINTED’ AS TAX DEDUCTION ELIMINATED

Credit unions are crying foul over plans in the federal budget to eliminate a tax deduction designed to help them compete with big banks. The budget proposal would phase out the long-standing tax measure over the next five years. “We were surprised that Budget 2013 targets credit unions in this way,” Gary Rogers, vice-president of financial policy with Credit Union Central of Canada, said in a release. The deduction has been in place for 40 years. It will decrease by 20 per cent start- ing in 2013, until it is eliminated in 2017, leaving credit unions to face a higher tax bill. Credit unions are “the small business of financial institutions,” Credit Union Central said. Credit unions do not have access to capital markets to issue shares; they incur higher costs to operate in small, underserved markets; and they provide social benefits that big banks do not, the organization said. According to the budget documents, this tax measure cost the government an estimated $47 million in 2012. The cost has been declining over the years.

Meridian, Ontario’s largest credit union, has grown to $9.6 billion in assets from $3 billion in the last seven years, it said in a statement.

“By reversing this important and longstanding deduction for credit unions, the government will significantly diminish consumer choice for Canadians,” said Bill Maurin, acting chief executive officer of Meridian.

“Meridian is calling upon the federal government to seriously reconsider the proposed scrapping of this deduction in light of the negative, longterm implications it will have on Main St., Canada.”