The Canadian Forum for Financial Markets (CFFiM) is asking the government to raise the RRIF conversion age, increase the RRSP and defined contribution pension plan contribution limit and changes to tax rates, among other proposals. The national association representing investment firms outlined its suggestions in a pre-budget submission last month. The federal government has since announced it will deliver its 2025 budget on Nov. 4.
Retirement matters
The CFFiM proposed gradually increasing the RRIF conversion age to 74. The current conversion age of 71 was set in 1992, when the life expectancy was 84.7 — 2.3 years lower than it is today (87). CFFiM says the current conversion age is outdated. “Canadians should have the freedom and flexibility to manage their retirement funds in ways that meet their needs and maximize tax efficiency,” it said in its submission.
The association also called on the government to raise the RRSP and defined contribution pension plan contribution limit to 30%, up from the current 18%. The current cap was set in 1992 with the intention to provide comparable retirement saving opportunities compared to defined benefit pension plans. However, the structure now disadvantages those with RRSP and defined contribution pension plans compared to those with defined benefit pension plans, the document said.
Changing the tax mix
In addition to changing how Canadians save for retirement, the CFFiM asked to bring Canadian taxes revenue in line with other OECD countries. Currently, 36% of Canadian tax revenue comes from personal income taxes (compared to 23.6% in OECD countries), 12.3% from corporate income taxes (9.2% in OECD countries) and 13.1% comes from value-added taxes (20.7% among OECD countries).
To achieve this, the association wants the government to lower the second-lowest marginal personal income tax rate from 20.5% to 14% over the next six years, cut the federal statutory corporate income tax rate from 15% to 13% by 2027 and increase the GST rate from 5% to 7% in the next two years.
The federal Income Tax Act adds up to over 3,600 pages, and the CFFiM wants the government to perform an independent review to simplify it. While there have been a myriad of calls for tax reform since the last review in 1972, nobody can agree on how to do it.
Seeking balance
The association also asked the government to balance the budget.
The Liberal government originally projected a deficit of $40 billion for 2023-24 in Budget 2024, but that ballooned to a $61.9 billion deficit with federal debt at 42.1% of GDP amid the ruckus at the fall economic statement last December.
“The debt-to-GDP ratio, with a commitment to reduce the ratio over the forecast horizon, is widely considered the best fiscal anchor because it links government debt to the size of the economy, providing a dynamic measure of fiscal sustainability,” the CFFiM said.
If at first you don’t succeed, try, try again
The CFFiM wants the federal government to try to set up a national securities regulator again, saying that the current fragmented structure with 13 jurisdictions results in duplicative efforts, higher costs and delays.
The last time there was a plan for a national capital markets regulator was in 2015. The Capital Markets Authority Implementation Office, lacked buy-in from Quebec, Alberta or Manitoba. It paused its efforts and laid off its staff in 2021.