Tax reprieve for Credit Unions -- for now
Credit unions are a part of many of our communities, but how are they different from banks? ARE they different from the big banks? Well, yes. They do the same things for us — pretty much — as banks, but there’s one crucial difference. Banks have shareholders, and they are not necessarily the bank’s customers. Those shareholders demand that profits be earned from the bank’s customers. The bank exists to serve its shareholders.
A credit union, on the other hand, is owned by the members — the customers of the credit union. The credit union also exists to serve its shareholders, but they are the customers. Simple, yes?
Another difference, for now at least, is that deposits in credit union accounts are fully insured against the failure of the credit union; deposits in banks are insured up to a limit of $100,000.
The big news recently is that BC has decided not to implement a planned increase on taxation of credit unions. BC credit unions are, of course, glad of this.
“On behalf of B.C. credit unions, we deeply appreciate the minister’s decision to defer the tax increase. This announcement demonstrates that the province understands the importance of credit unions and their impact in the communities where they operate,” said Don Wright, President and CEO of Central 1.
“We look forward to continued consultations with the government and we hope that the result will allow credit unions to continue to support local economic development and provide financial services to underserved communities,” Wright said.
A competitive tax environment allows credit unions to reinvest in a diverse provincial economy by creating quality, head-office jobs across the province, providing more financial support for community projects; and making more local lending decisions to help small businesses and individuals.
“We are pleased by this decision,” said Tom Murray, CEO of Nelson & District Credit Union. “This means we will have more money to lend to our members and support local businesses and home owners. We look forward to meeting with the government to explain our position and help develop regulations and legislation that will allow us to grow.”
The province had planned to phase out a small business tax rate on credit unions and increase it incrementally over the next four years. The lower tax rate was put in place in recognition of the fact that credit unions, as B.C.’s cooperatively-owned financial sector, are in a unique position to reinvest capital back into the provincial economy, as well as support initiatives in local communities. For the past three years B.C. credit unions have been advocating for a continuation of the existing tax rate.
British Columbia’s 42 credit unions operate in every corner of the province and provide financing for homeowners and businesses in excess of $56 billion.