Skyline of the financial district

The head of the Canadian Bankers Association has raised concerns about proposed federal taxes that specifically target the banking sector.

Speaking at a Canadian Club Toronto event Thursday, association president Anthony Ostler said new taxes on banks and insurers would not only raise the cost of capital for the banking sector but for companies across Canada since they add another variable for potential investors in the country.

A technology company might choose to invest elsewhere, he said as an example, where they wouldn’t be “randomly attacked.”

“So we actually increase the cost of capital for all Canadian corporations by creating uncertainty over who could be next,” he said.

The taxes include a one-time 15% windfall tax on large bank and life insurer profits made during the pandemic, plus a permanent increase of the tax rate from 15% to 16.5%. The taxes were included in Bill C-32, which was tabled in Parliament earlier this month.

In September, the parliamentary budget officer estimated the two taxes could generate $5.3 billion over the next five years.

Ostler also said more consumer protection is needed as new entrants in the fast-growing payments space get ahead of regulation. There are now more than 2,000 non-bank payment services providers with more expected amid initiatives like the push for open banking, he said.

The payments space has grown with numerous technology companies such as Shopify, Square and PayPal offering options, while more recently there’s been tremendous growth in services like buy now, pay later.

Ostler said that while competition is good, the payments marketplace is running in front of the regulatory environment and consumers aren’t being adequately protected.

“Let’s be clear, we don’t want the next FTX or Celsius coming from Canada’s payments ecosystem,” he said.

He said the federal government should add consumer protections to the Retail Payments Oversight Framework as they consider next steps.