Thank you, Mr. Chair and honourable committee members. I work for AIM Trimark Investments, in the private sector, but I am here as a volunteer on behalf of the Investment Funds Institute of Canada, as chair of their tax working group. We represent approximately $700 billion of Canadians' investments, which they use for a variety of reasons, primarily retirement, and I am here today to spend a few minutes illustrating some of the issues that we feel should be a priority for the government when it comes to retirement planning. Given the enormous number of Canadians who will soon be reaching retirement age, we believe that retirement and planning for retirement is a huge priority for Canadians and should be for the government as well.
As you saw in our submission, we had a number of ideas. I really wanted to spend just a couple of minutes today highlighting four of those specific ideas and proposals that the government might wish to look at when preparing for its 2008 budget. I'll address very briefly the original promise by the Conservatives to eliminate the capital gains tax on a reinvestment within six months. I'll address the long-going discussion of the tax prepaid savings plans. I'll address the effect of GIS, guaranteed income supplement, clawbacks and a couple of ideas there, and finally, I'll just spend a moment on the recent pension splitting, which we are very happy to have, with a slight recommendation that we would make.
Very quickly, on the first one, as we all know, the government promised in January, in the run-up to the election, that if they were elected they would eliminate the capital gains tax on a reinvestment within six months. We've done a lot of work on that. We've worked with other groups like the C.D. Howe Institute on a number of ways that could be accomplished, minimizing tax costs to the government while still achieving the policy objective. There seems to be a myth that capital gains are only for the wealthy. We pulled some statistics, and they are sourced in our brief, that in fact over 55% of people claiming capital gains in Canada actually have income of under $50,000 a year. So this is not just for the wealthy; this is for widespread Canadians. What we're suggesting is, as opposed to putting in a specific program, maybe you'd like to revisit something like a lifetime gains exemption or an annual gains exemption that would achieve the objective of allowing Canadians to diversify their portfolios to achieve a better way of saving for retirement while minimizing the ultimate cost to the government.
The second area to touch on briefly is the GIS clawbacks. As you know, for low-income Canadians who receive the guaranteed income supplement, there is a disincentive to save, because when money is taken out of registered plans they are clawed back 50ยข on the dollar. There was a study a number of years ago that showed that low-income Canadians should not invest in RRSPs because they'd be better off collecting government benefits. The same problem is also escalated with the new dividend rules where you gross dividends up by 45%, enhancing a clawback. What we're recommending is that when it comes to dividends you only use actual dividends and that RRSP and RRIF withdrawals will not be included in the calculation of clawbacks, to encourage all Canadians to be able to save for retirement.
Finally, on the pension splitting, we're certainly very pleased with the legislation that was passed in June of this year to allow Canadians to income split, pension split, and that's a big move by the government in terms of policy. We would make one additional comment. Most Canadians do not have a registered pension plan. They save through RRSPs and RRIFs, and the problem is that of course with an RRSP or RRIF, the way the legislation is right now, to be able to split with a spouse or with a partner you've got to be at least 65 years old, whereas of course if you were part of a pension plan and you chose to take early retirement, let's say at age 55, you'd immediately be able to split that pension.
We've got a lot of concerns. People have written to us from all across Canada saying this is unfair and it is discriminatory, and it really favours people in defined benefit pension plans who could retire early and take advantage of the splitting and the pension credit. We would recommend that the government look into the possibility of perhaps lowering the age for all Canadians to age 55 to allow them to both pension split and get the pension credit, and not discriminate against people who don't have a defined benefit pension plan.
Those are just four of the ideas that are highlighted in our paper, ideas to consider for the upcoming 2008 federal budget. Thanks again.