Thank you, Mr. Chair and members of this committee, for this opportunity to provide the views of members of the Investment Funds Institute of Canada, IFIC, at this meeting.
IFIC is the voice of Canada’s investment funds industry. By connecting Canada’s savers to Canada’s economy, our industry contributes significantly to Canadian economic growth and job creation.
In my remarks today, I will focus on recommendations related to three areas: registered plan reforms in support of retirement savings, GST/HST reform, and equitable taxation for mutual fund corporations. Also, I'll be pleased to respond to committee questions on any of the recommendations provided in our formal brief of August 6, 2014.
IFIC has consistently supported the government’s efforts to offer Canadians more ways to save for their retirements and other financial needs. Our industry has been an important contributor, for example, to the success of RRSPs, RESPs, RDSPs, and TFSAs, to name a few, and we have supported new savings programs, such as PRPPs, as a matter of good public policy, even though our members are not positioned to participate directly in the manufacture of these plans.
While GRRSPs, group registered retirement savings plans, fulfill the same goal as PRPPs, and that is, long-term savings through a workplace plan, they are not accorded similar tax and regulatory treatment. Such differences unnecessarily disadvantage GRRSPs, which are an accessible and efficient option within the retirement savings landscape. To ensure that GRRSPs continue to fulfill this role, we ask that that they be accorded the same treatment as that of PRPPs with respect to payroll tax exemptions, auto enrolment, and the locking in of employer contributions.
During the 2011 federal election, Prime Minister Harper announced his intention to increase the annual individual TFSA contribution limit to $10,000 after the budget returned to balance. We agree that increasing the TFSA contribution limit would improve the options and flexibility available to Canadians for saving and investing. We ask the government to consider raising the TFSA contribution limit to $10,000 annually.
A recent report published by the C.D. Howe Institute highlighted the impact of mandatory minimum withdrawal rules for registered retirement income funds, RRIFs. As the report notes, these rules have not kept pace with gains in Canadian life expectancy, and as such, can increasingly cause seniors to outlive their savings under the current withdrawal rates. We ask the government to consider increasing the mandatory age for initial RRIF withdrawals and/or reducing the minimum drawdown amounts in order to mitigate the risk that seniors outlive their savings.
Since its inception in 1991, the GST has applied four to five times more heavily to the value of services provided to mutual and other funds than to the equivalent value of services provided to non-fund investment products. For the majority of mutual fund investors, the GST/HST on the management expense ratio is a tax on retirement savings. Today, almost 57% of assets under management in Canadian mutual funds are held in registered plans by investors saving for retirement. We ask the government to consider applying GST more fairly to fund products in order to relieve the tax burden on Canadians who are saving for their retirement.
When calculating their taxable corporate income, most corporations in Canada are entitled to apply the 13% general rate reduction to income that is not eligible for another corporate tax reduction. Mutual fund corporations, however, are not allowed to apply this reduction because two of the principal forms of mutual fund corporation income—capital gains and dividends—are already subject to tax reductions. Yet mutual fund corporations may earn income from sources other than dividends and capital gains, such as interest income or income from foreign sources. To rectify this imbalance, we request that Canadian mutual fund corporations be entitled to apply the general rate reduction to all eligible income.
Mr. Chair, that concludes my opening comments. I would be pleased to answer your committee’s questions.