Despite a possible election announcement next week, some Canadian institutions are already submitting their federal budget wish lists to the Conservative government.
The Investment Funds Institute of Canada, which sent its submission off Wednesday, chose to focus its letter on retirement issues.
“Canada’s demographic is changing and so are financial products to reflect that,” says Barbara Amsden, IFIC’s director of strategy and research. “We want to make sure there’s tax legislation and support to help people in retirement.”
IFIC made six recommendations in its submission. The first and most pressing called for the government to “assess preserving the beneficial tax treatment of Canadian dividends when earned inside of registered plans.”
Amsden says in 2006 the government removed the double taxation of dividends, which was a positive move, but that doesn’t change the fact that a dividend inside an RRSP or RRIF doesn’t have the same tax advantages as they do outside of those accounts. “This is one [thing] people didn’t necessarily see as an issue, but we’re seeing it as a real opportunity to help people grow their RRSP,” she explains.
Another request IFIC is making is for the government to allow couples to pension-split starting when they’re 55 instead of 65. Amsden says her organization wants to make sure there’s equality between people who hold different types of pension plans, and making the income splitting age younger would help.
IFIC also wants to see the government eliminate or reduce the RRIF minimum withdrawal factors, increase pension plan limits and adjust them for interest and mortality changes, allow beneficiaries of registered plans to claim a capital loss, and remove the “dividend gross-up from the net income calculation” when determining Old Age Security and Guaranteed Income Supplement clawbacks.
Amsden says that in the past, IFIC’s recommendations have earned results, so the group is looking forward to the opportunity to speak to the Department of Finance.
If an election is called, IFIC won’t change course. “We think these recommendations are of interest to all parties, though we’d like to make sure the priority of these is not lost,” she says.
The Investments Industry Association of Canada also made a pre-budget submission. The IIAC’s main goal is to see the government lower capital gains taxes. “Canada’s current framework for capital gains tax is a major impediment to the supply of risk capital for productive investment, particularly for small- and medium-sized enterprises and start-up businesses,” wrote IIAC president and CEO Ian Russell in the organization’s letter to the Department of Finance.
“A reduction in capital gains tax, we believe, will result in greater business and job creation, enhanced productivity and economic activity, and overall wealth creation and prosperity for Canadians,” he adds.
Russell suggests reducing or eliminating the 50% inclusion rate for capital gains, extending the lifetime capital gains exemption to publicly listed shares of small companies, and adopting the Conservatives’ 2006 promise to eliminate gains on individuals with real and financial assets if the proceeds were reinvested within a six-month period.
It’s likely a number of other organizations will submit their comments in the coming weeks, as some groups, such as IFIC, will be invited to speak directly to the Department of Finance in late September or early October.
Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com
(08/27/08)