Finance Committee on May 26th, 2015

[Scott Brison, Liberal, Kings—Hants, NS]

Professors Donnelly and Young, if it's a public policy objective to encourage more savings, that's one thing, but you're saying that much of the TFSA investment that will result from this will be simply a reallocation. It won't be new savings. It will simply be a reallocation of existing savings.

[The Chair, Conservative, James Rajotte]

Make a brief response please.

[Maureen Donnelly]

Yes, that's what the U.K. experience showed, and there have been other mentions this morning that a lot of it is existing money that is moved from places where tax would be collected on it to a place where a tax will not be collected on it.

[Scott Brison, Liberal, Kings—Hants, NS]

No new savings, just less revenue for health care and other....

[Maureen Donnelly]

I wouldn't say “no new” but not as much as one might hope.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Brison.

We'll go to Ms. Bateman please.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Thank you to all of our witnesses this morning.

Mr. Fréchette, I particularly liked your comment about the need to have more studies on the TFSA program and its impacts.

I have to start with the two academics in the room, if I may, because I don't actually understand how you're approaching things.

First of all, as academics, I'm certain you've studied the British case. Ms. Donnelly, your intention, I expect.... We have data from 2009 when the Conservative government introduced tax-free savings accounts. Then we augmented the tax-free savings account in 2013, and we're about to do that again. Are you planning on studying the Canadian data as well as the British data?

Okay, that's good.

The other thing I don't understand.... I actually went to business school. I went to Western and I did take tax policy. Actually, part of our study told us that, when capital is accumulated, that's a benefit to the economy. That's part of the study of tax policy. Has your study, Ms. Donnelly, in terms of the impacts of the tax-free savings account, done any analysis regarding the pool of capital that will be available to invest in the economy and in small businesses and in productivity and in growth in our economy, or is that still to come along with the Canadian analysis?

[Allister W. Young]

There's insufficient data right now on the accumulation of capital and just exactly—

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

There's what kind of data?

[Allister W. Young]

There's insufficient data. There isn't enough information yet on the impact that the TFSA will have on the accumulation of capital. We just don't have the numbers yet.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Since 2009, you don't have the numbers.

[Allister W. Young]

No.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Okay.

The other thing I'm very curious about—and as a chartered accountant I practised tax for a period of time—maybe I don't understand what you're saying but you are saying that there is a huge loss to the treasury. The way I understand it, we have two tax saving models. One is an RRSP where you're making a lot of money working at your university and you probably have an RRSP that you can put money into at your highest tax rate and then you take it out way down the road when you're much older. In fact, you're required to start managing that plan at age 71. The tax consequence to the treasury is quite a lot greater because you don't pay until present value of money has had significant implications. When you talk about the tax implications of the TFSA, have you done an equal or converse study with the same questions about the impacts on the treasury regarding registered retirement savings plans?

[The Chair, Conservative, James Rajotte]

You have one minute for a brief response.

[Maureen Donnelly]

The focus of our research has not made that comparison. Our major concern is the fact that, to go back decades, we have had in the Canadian tax system a fundamental principle that a buck is a buck, where a dollar of wealth or income was to be taxed regardless of its source.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Funnily, if you look at the present value of money, with your tax-free savings account that you've invested in, you already paid the tax on that money and now—

[Maureen Donnelly]

First of all, you're making assumptions about me that I don't think are necessary for this discussion.

[The Chair, Conservative, James Rajotte]

Okay—

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

—or person, but that's my assumption. It could be person A. My question is, how are you balancing the research?

[The Chair, Conservative, James Rajotte]

Just a brief response please.

[Maureen Donnelly]

How am I balancing my research? I'm looking at the impact on the average Canadian of an extremely large tax expenditure that has not come under adequate scrutiny.

[The Chair, Conservative, James Rajotte]

Okay, all right. Sorry, but the time is up for that round.

Mr. Dionne Labelle, s'il vous plaît.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Thank you, Mr. Chair.

Good morning, everyone, and thank you for joining us today.

If I'm not mistaken, an OECD study was published last week about the increasing inequality in our societies and the impact of this increase. I am talking about the Gini coefficient. I'm guessing that most of you are familiar with this concept. The study says that this increase in inequality has a major impact on GDP growth. We see that the budget proposes two measures: the TFSA program and income splitting, which will lead to increasing wealth and income inequalities.

My question is for Mr. Fréchette. Have you calculated the impact of those two measures on GDP growth?

[Jean-Denis Fréchette]

As I mentioned in my presentation, we have calculated the impact on tax expenditures.

In terms of the impact on GDP growth, we are not there yet. As I was saying, more studies are needed. The TFSA program is relatively new. We don't have the required data to measure it yet.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

I'm sorry to interrupt you, but you are already anticipating an impact in terms of inequalities. For instance, in 2060, wealthier households will benefit from the TFSA in a proportion that is 10 times higher than low-income households.