Financial services industry organizations say they are hopeful that Ottawa will maintain its ongoing deficit elimination efforts as part of the financial plan it will outline in the upcoming federal budget.
At the same time, the groups are pressing Ottawa to make a variety of taxation changes that, they say, will help Canadians save more for retirement and help boost small businesses and entrepreneurship.
“We’re hoping to see, at both the federal and provincial level, that there is continued attention paid to restoring budgets to a balance, and within a reasonable period of time,” says Barbara Amsden, director, strategy and research, with the Investment Industry Association of Canada (IIAC) in Toronto. “That would be accompanied by measures that don’t take tax dollars away from investments, but, rather, rely on the private sector to start investing again in companies in Canada.”
The government should maintain its emphasis on balancing the nation’s books, Amsden says, before a negative fiscal event – such as a sudden spike in interest rates or a further downturn in the economy – makes the initiative more difficult to achieve or imperils the government’s future ability to pay for social programs.
The federal government, which hadn’t announced a date for the budget as of press time, has said that it will look to keep spending in check in the 2013 budget, and is still on track to keep its target date of 2015 for balancing the books.
Financial services industry organizations say that the changes they are suggesting in regard to tax-favourable vehicles such as RRSPs and registered retirement income funds (RRIFs), tax-free savings accounts (TFSAs) and other programs, would boost investment and savings, resulting in relatively minimal effect on government revenue.
“We wanted to focus on initiatives that didn’t cost a lot of money,” says Joanne De Laurentiis, president and CEO of the Toronto-based Investment Funds Institute of Canada (IFIC), regarding the suggestions IFIC made in its pre-budget submissions to the government this past autumn.
Both IFIC and the IIAC have called for changes to the rules governing group RRSPs – specifically, that payroll taxes be eliminated for employer contributions to group RRSPs, and that other rules governing group RRSPs be better aligned to those rules governing the proposed pooled registered pension plans (PRPPs) and other pension plans.
According to a Nov. 29 letter to Senate standing committee on national finance written by Ian Russell, president and CEO of the IIAC: “Eliminating payroll taxes from group RRSPs and employer-direct contributions will reduce costs for businesses, especially small businesses that are the majority of group RRSP users. These businesses would then have more money for growth, jobs and/or income on which taxes would be paid.”
IFIC would also like to see the federal government reduce the minimal withdrawal rates for RRIF accounts, which, IFIC contends, would make the program more flexible for Canadians who are living longer and may need to manage their savings over an extended period of time.
@page_break@IFIC also is calling on the government to increase the annual contribution limit for TFSAs, a promise the Conservatives made in the 2011 federal election, when they said they intended to increase the limit to $10,000 from $5,000 once the budget was balanced. For 2013, the TFSA contribution limit was raised to $5,500 as part of the program’s indexing to inflation.
The IIAC has called for several changes, which, it says, would encourage more risk capital to be invested in growth companies. These include the extension of the flow-through share structure, which has been used to fund growth in the resources sector, to other economic sectors, such as biotechnology and other high-technology sectors.
The IIAC also would like to see changes to the Immigrant Investor Program, including ensuring that dealers registered by the Investment Industry Regulatory Organization of Canada have a key role in the program, which the government is currently reviewing. (See story on page 12.)
Several financial services industry groups, including the Toronto-based Canadian Bankers Association (CBA), would like Ottawa to continue to push for a national securities regulator, even as that hope seems to have dimmed.
According to the CBA’s pre-budget submission to the House of Commons standing committee on finance: “Moving to a national system is consistent with the strengths of the effective and streamlined national regulatory system in place for Canada’s banks.”
Many financial services industry groups are urging the federal government to continue to work with the provinces on the implementation of the PRPP program. Advocis, the Toronto-based advisor advocacy group, would like to see the PRPP program structured in such a way that PRPP members could have access to professional financial advice.
According to Advocis’s pre-budget submission: “Public policy needs to foster an expansive role for professional financial advice in order to ensure that Canadians can meet their retirement income and other financial goals.”
Financial services industry groups continue to ask the federal government to intercede on their behalf on the matter of the U.S. government’s Foreign Account Tax Compliance Act (FATCA), which effectively compels financial services firms in countries outside the U.S. to collect information and report on their U.S.-citizen clients to the U.S. Internal Revenue Service.
FATCA was introduced to help the U.S. government identify American taxpayers with foreign accounts who were not in compliance with their tax obligations.
The Canadian government has been in negotiations with the U.S. government on an intergovernmental agreement between the two countries that would provide for a more streamlined reporting regime and relief to the Canadian financial services industry.
Without such an agreement between the countries, FATCA would represent such a compliance burden on the Canadian financial services industry that it would affect expansion and profitability, says De Laurentiis, and that would limit innovation in the industry and jobs.
De Laurentiis praised the Canadian federal government for its ongoing work to address the FATCA issue: “The Department of Finance has been seized with this, and it really understood the impact [that FATCA would have].”
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