KELOWNA – Interior Savings is appreciative of the B.C. government’s recent decision to defer increases to the credit union tax rate.
The province had planned to phase out a small business tax rate for credit unions over a period of four years. The lower tax rate was originally 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.
On Jan. 24, the B.C. government announced it would retain the current tax rate allowing further consultation on the matter.
“We are pleased that the B.C. government has listened to the concerns of B.C. credit unions and their members,” said Kathy Conway, president and CEO of Interior Savings. “We look forward to continued consultation with the provincial government and our local MLAs to ensure B.C. credit unions can maintain our current level of investment in local communities.”
Nearly 1.9 million British Columbians are credit union members, 8,700 British Columbians are directly employed by credit unions and 42 B.C. communities rely on credit unions as their only financial institution. In 2015, BC credit unions invested $26.3 million in charitable donations and its employees volunteered 32,964 hours. In 2016, Interior Savings alone provided financing to over 1,500 small businesses, returned $2.78 million in profits to its members, awarded $453,000 in bursaries to local students and invested another half a million dollars in local community projects.
As cooperative organizations governed by provincial legislation, credit unions are required to maintain adequate levels of capital, similar to banks.
Unlike banks, the availability of capital to credit unions is limited and therefore a significant pool of retained earnings is needed to meet those capital requirements. A further increase to the credit union tax rate would serve to erode profits and retained earnings and negatively impact credit unions’ abilities to create jobs and invest in BC communities.