Canada Looks to Close C$1.24 Billion Tax Loophole for Banks
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Canada is closing a tax loophole used by financial institutions on derivatives contracts, saving the government as much as C$1.24 billion ($1 billion) over four years.
Under a proposal in the federal budget, banks will no longer be able to claim an income-tax deduction on dividends paid by Canadian companies under certain derivatives contracts. As part of these transactions, a bank typically buys shares in Canadian companies as a counter party to a derivative investment taken out by a pension fund or other institutional investor. These derivatives allow investors to make bets on equities or stock indexes without owning the actual shares.