Evidence of meeting #87 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was chair.
A recording is available from Parliament.
11:55 a.m.
Liberal
11:55 a.m.
Conservative
The Chair Conservative James Rajotte
I understand the NDP wants to deal with clauses 19 to 24 separately.
Mr. Rankin, go ahead on clause 19.
11:55 a.m.
NDP
Murray Rankin NDP Victoria, BC
Clause 19 effectively doubles contribution limits for the TFSA, moving it from $5,500 to $10,000 in tax year 2014. We think this is wrong-headed and have said so of course in the House. Any plan that allows the top 20% to get the majority and to get more than the 80% who are in the bottom of the income levels is something we will oppose. We think with the middle class struggling to make ends meet and huge mounting household debt, this is just a pipe dream for most Canadian families, so we're just basically concerned about any plan that leaves middle-class families paying for tax breaks for the wealthy few.
We've said this over and over again and we certainly will say it here.
11:55 a.m.
Conservative
11:55 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
On May 26 officials told this committee that they had examined how these changes to TFSAs would impact the provinces.
Can you share with us how these changes will impact the provinces? Do you have that information in terms of the fiscal impact?
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
Roughly speaking, the effect on provinces would be roughly half of the impact at the federal level.
Noon
Liberal
Scott Brison Liberal Kings—Hants, NS
Can you share more of the information? As you know, this impact analysis is no longer a cabinet confidence since the legislation has been introduced, so can you provide us with more granularity around the cost to provinces?
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
We'll have to look at what we have and what we can disclose under normal circumstances.
Noon
Liberal
Scott Brison Liberal Kings—Hants, NS
It's no longer a cabinet confidence because the legislation's been introduced, and further to that, members of Parliament of all parties have a fiduciary obligation to Canadians to have this information.
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
Yes. What we have on the provincial basis is the effect on the tax base, so that we have.
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
That can be provided. Yes.
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
I don't have this information now in front of me.
Noon
Liberal
Scott Brison Liberal Kings—Hants, NS
I'm saying this respectfully. I have great regard for our public servants, but that information ought to be provided to committee and should be provided in a timely manner. It would have been helpful to have it today.
Have you examined the long-term impact to these changes on OAS? We were told by the parliamentary budget office that this change is going to have some unintended consequences on OAS cost.
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
About 15% of our cost is associated with the OAS-GIS program.
Noon
Liberal
Scott Brison Liberal Kings—Hants, NS
But some financial advisers are telling their wealthier clients that they can continue to get the maximum guaranteed income supplement for three years while living off their TFSAs. They are being told to maximize their annual TFSA contributions, delay their CPP benefits and pension plans as well as RRSP withdrawals until the age of 70, and this way they can collect the maximum in OAS and GIS for three years from 67 to 69 while supplementing their income with their TFSA accounts.
Is the government, or are you, aware of this loophole that will allow quite wealthy people to qualify and receive a guaranteed income supplement?
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
We are aware of these.
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
We don't think it is associated specifically to the TFSA. It's associated with the fact that individuals can delay reception of those benefits.
Noon
Liberal
Scott Brison Liberal Kings—Hants, NS
But would you agree that the policy objective of the guaranteed income supplement is not to benefit wealthy...?
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
Yes, but I'm also saying that this is not an issue related to TFSA. Anyone who can find other sources of income during these two or three years can do that strategy.
Noon
Liberal
Scott Brison Liberal Kings—Hants, NS
TFSAs provide an opportunity for people to shelter income or to shelter wealth in a manner that enables them to qualify for GIS.
Would you agree that's inconsistent with the objectives of the GIS?
Noon
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
As I said, I think looking at these specific strategies is not that instructive to get to these broad results. What we find is that for high-income individuals for instance, in order to maximize their retirement income, they would need to invest anyway in their RRSP, for instance. That would be optimal for them.
It's very unlikely then that these individuals, given that it's not optimal, would only invest in a TFSA throughout their whole life and rely only on that for retirement, and then collect a GIS. What our analysis is concluding is that it would not be optimal anyway, so we don't project that this would be significant, that very wealthy individuals would be on GIS.
Noon
Liberal
Scott Brison Liberal Kings—Hants, NS
Prior to my raising it with you, were you aware of this potential loophole?