Description: A report released by Canada’s Parliamentary Budget Officer is raising alarm regarding the government’s plan to double the limit on Tax Free Savings Accounts (TFSAs). Both the federal government and the provinces would eventually be losing billions in revenue each year as a result of the changes. With aging populations, this raises serious questions about where governments will find the revenue to replace the loss from TFSAs.
Source: Globe and Mail.com
Date: February 25, 2015
Discussion Points:
1) What is your opinion on the planned increase in the TFSAs?
2) If you had $5,000, would you contribute it to as TFSA or to a registered retirement savings plan?
3) If you were advising the government, what revenue generating strategies might you recommend?
Brian Masterson
It is rather ironic that the government is planning to increase the contribution limits of the TFSA’s while concurrently the Canada Revenue Agency is attacking successful TFSA’s (i.e. those that have significantly appreciated through aggressive investing within the plans).
Since their inception the controls over the permissible investments by a TFSA have been tightened to effectively mirror those rules constraining RRSP and RRIF investments.
Nevertheless, the Canada Revenue Agency is apparently reassessing income earned within successful TFSA’s as business income and subject to taxation, thereby eliminating the tax free accumulation of income within these plans.
Better the government should clarify the tax policy regarding TFSA’s and leave the contribution limits as they are rather than increase the limits and permit the Canada Revenue Agency to attack at will those plans that they deem inappropriately successful.