These were our predictions for the tax-free savings account, and on that basis it belied the promise of universal benefit. As Canadian data emerges on the TFSA experience to date, research recently published by our Canadian tax academic colleagues, in particular Professor Kevin Milligan of UBC and Professor Jonathan Kesselman of Simon Fraser, suggests that our predictions were more accurate than we would have liked.
Yes, it is true that millions of Canadians in all walks of life have opened and made contributions to TFSAs; however, that does not answer the question as to which Canadians at which income levels will the largest benefits accrue and at what cost to the Canadian tax system.
One of the features of the TFSA that most unsettles tax policy scholars is the ability for interspousal contributions. Canada's benchmark tax has always identified the individual as the appropriate tax unit. Measures that allow transfer of wealth between spouses undermine that principle and represent significant disincentives for Canadian women to enter or re-enter the workforce by disproportionately benefiting single-income households.
In conclusion, this is an extremely expensive tax expenditure. Although early-year estimates may not shock, the long-term estimates of revenue to be forgone by future governments are enormous and will serve an increasingly narrow population of Canadians over time.
The budget speech refers to four reasons Canadians might use their TFSA to save: one, buy a home; two, start a business; three, pay for post-secondary education; and four, make retirement more comfortable.
Reducing the public treasury through increasing tax-free savings is a very blunt instrument to use in the pursuit of helping Canadians make these key aspects of their lives more affordable. More equitable and more finely tuned measures already exist for those specific purposes, and any additional expenditures through the tax system should be directly targeted. To simply expand the TFSA does not serve that purpose and is not worth the high cost to the citizenry as a whole.
Those are our remarks.
Thank you.