Beautiful caucasian elderly couple in the park in autumn

The C.D. Howe Institute is calling for a temporary suspension of tax collection on registered retirement savings plan (RRSP) withdrawals. 

For a limited time, the government should suspend tax withholdings and collection on RRSP withdrawals up to a maximum amount, the think-tank’s crisis working group said in a release on Monday, following existing programs such as the Home Buyers’ Plan.

A suspension would provide liquidity to those who need it during the crisis, complementing existing government assistance that may not cover self-employed individuals, the group said.

Under the proposal, tax-free RRSP withdrawals would have to be re-contributed over a maximum period of around 10 years, with no loss of tax-deferred retirement savings room.

“The government would eventually collect the deferred taxes when future re-contributions are made out of after-tax dollars and later withdrawn for retirement, or when participants pay taxes on money they fail to re-contribute,” the release said.

“With interest rates so low, the cost to the government of what amounts to a delay in tax payments would be negligible.”

The measure could be implemented quickly through financial institutions that already withhold taxes on withdrawals, it said.

The Liberal government has already announced relief for retirees drawing down RRIFs.

In addition to the RRSP recommendation, the group is calling on the federal government to release data on employment insurance (EI) claims and the Canadian Emergency Response Benefit (CERB) on a timely and regular basis, and warned of potentially misleading figures in Statistics Canada’s March labour force survey.

“Because the survey reflects the situation early in the crisis and related shutdowns, it provides only partial insights into the impact of Covid-19 on the Canadian labour market,” the release said. 

On Thursday, Statistics Canada reported the economy lost more than a million jobs in March, the worst recorded single-month change.

The C.D. Howe Institute also called for federal and provincial coordination of income support for low-income Canadians, support for students and financial institutions, and the creation of a back-to-work strategy to protect vulnerable populations.