Campaigns

What is an Excess Profits Tax?

An Excess Profits Tax, or Windfall Profits Tax, is a mechanism that the Canadian government can use to collect a portion of the massive profits being reaped by corporations and use the money to fund critical programs and services, and distribute it to working people to ease the burden of rising food and energy costs. Under an excess profits tax, companies making extraordinary profits during a war or crisis pay a steep corporate income tax rate—in some cases historically up to 100 per cent—on profits above a set “normal” rate of return. This normal rate of return has been calculated in different ways across jurisdictions and time, but a typical approach would use an average profit rate from recent years.

What businesses would it apply to?

We’re calling for an Excess Profits Tax to be imposed on some of Canada’s wealthiest corporations, including oil and gas companies and Big Grocers. Before the pandemic, oil and gas companies had an average combined profit margin of 11%. By 2022, their profit margin had reached 21%. A lot of these profits aren’t being invested back into research and technology or job creation— instead, massive portions of this money are paying off shareholders instead of creating more jobs for Canadians. Big Grocers, like Loblaw, Sobeys and Metro, have also been raking in record profits by price-gouging us at the checkout line. The federal government should be recouping the excess profits they’re making off our backs and use the funds to ease the pressure we’re feeling.

This sounds impossible / They’ll never do it!

We get that, but recent coverage of the federal budget found that the federal government was actually considering imposing an Excess Profits Tax on oil and gas companies, but corporate lobbyists convinced them to back down so they could continue to line the pockets of their wealthy shareholders. Polling has also found that a majority of Canadians (62%) across the country support this tax, with only 21% disagreeing. Around the world, many other countries have also imposed Excess Profits Taxes on large corporations in order to ease the cost-of-living crisis and make life more affordable for people. Even in the UK, the Conservative government imposed a 35% tax on oil and gas companies’ profits in 2022 to raise funds for people facing soaring energy bills. The tax will remain in place until at least 2029. Corporate lobbyists may be powerful, but if we get organized we can force the wealthiest corporations across the country to finally pay their fair share.

How much money could we generate from an Excess Profits Tax?

We stand to see substantial reinvestments in our communities if we tax the record profits of corporations. For example, the Canadian Centre for Policy Alternatives found that boosting the federal rate to 20 per cent, from its present rate of 15 per cent, which is still low by historical standards, would generate more than $11 billion annually.

What would an Excess Profits Tax pay for?

An Excess Profits Tax could help pay for the critical programs and services that our communities desperately need to tackle both the climate and cost-of-living crisis. Money generated from an Excess Profits Tax could help pay for affordable housing, public transit, childcare, and green energy retrofits. Canada is currently spending $88 billion over 10 years to transition to a lower-carbon economy but this number needs to be much higher if we’re to adequately tackle the climate crisis. It’s only fair that the same companies that have been fuelling the climate crisis while making life more unaffordable for everyday people should be forced to pay their fair share in the transition to a green energy economy.