Finance Committee on May 26th, 2015

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

I am going to continue to talk about the impact on the provinces.

Did you do a prior assessment of the loss in revenue for the provinces and territories?

[Miodrag Jovanovic]

When we develop new proposals, part of our briefing for the minister is always to examine the impact on the provinces. So the simple answer is that we did examine the impact on the provinces.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

To go back to my colleague Pierre's question, were the provinces consulted before this measure was announced in order to assess the impact it might have on their revenues? Were there any consultations before the decision to increase the TFSA limit was made?

[Miodrag Jovanovic]

The increase in the TFSA was part of the Conservatives' 2011 platform. The provinces were already aware. During our ongoing discussions with the provinces, we often exchange ideas on the potential impact of the measure. As for the extent to which we deal with the provinces when a budget initiative is being developed, that is another question.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

If I understand correctly, there were no formal consultations on the matter.

[Miodrag Jovanovic]

There were no specific consultations as this measure was being developed.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Okay.

[Miodrag Jovanovic]

As I said earlier, we maintain a constant dialogue with the provinces.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you.

Are there any other questions?

Okay, then it's back to you, Mr. Cullen, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Perhaps the officials could tell us, when the TFSA was first introduced it was indexed.

Is that correct?

[Miodrag Jovanovic]

Yes.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Is it continuing with that policy of indexing the TFSA contributions?

[Miodrag Jovanovic]

The annual contribution limit of the TFSA has been increased to $10,000 annually. It has been de-indexed.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

How come?

[Miodrag Jovanovic]

It was the decision of the government to de-index the tax-free savings account.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Let me be more specific.

What is the impact of indexing the original TFSA? What does that effectively do to the impact of the TFSA on the treasury and to the size of the TFSA?

[Miodrag Jovanovic]

Well, if you assume a 2% indexation, for instance, by 2046, the TFSA at $5,500 would have reached $10,000.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Sorry, but could you say that last sentence again?

If you had allowed the indexation to continue on the original contribution limits, by what date would it have reached that amount?

[Miodrag Jovanovic]

I think that if you do the calculation at 2%, again it's an assumption—

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Sure, take it at 2%.

[Miodrag Jovanovic]

—because we don't know what the inflation will be. If I remember well, I think it's 2046.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Given the original policy, again assuming a 2% indexation rate connected to inflation, the TFSA contribution limit would have gone to $10,000 over the next 30 years or so, if you allow that trajectory. Is that right? The ceiling limit would have increased naturally as per the original policy.

[Miodrag Jovanovic]

Yes.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

When the government decided to double the original contribution ceiling from $5,000 to $10,000, it chose not to index.

What would the impact have been if the indexing had remained as part of the TFSA policy?