Flaherty's TFSA is simply an incentive/gimmick to get Canadians to collapse their RRSP and start a TFSA and/or stop contributing to RRSPs......the government is highly covetous of the half trillion dollars “tied up” in RRSPs and the deferred taxes contained therein, that they are salivating over.
Switching out of an RRSP into a TFSP is just the “trick” needed to bring this about.
I told the Liberals on day one that this is what Flaherty is likely up to.....to kill the RRSP as we know it. Still waiting for them to clue in and call a spade a spade. Who knows. maybe the Liberals also secretly covet that “reserve” of RRSP tax dollars and the opportunity to accelerate this stream of taxes under “their watch”.
It was a Liberal government that introduced RRSPs 50 years ago, meanwhile it is the current Liberal opposition who are allowing this TFSA attack on RRSPs (and others, including the gross disparity between the double taxation of income trusts in RRSPs versus single taxation in pension funds) to go unchallenged.
Brent,
You are right. The cons are hoping to destroy the RRSP to accelerate tax collection. My sister (who is not too knowledgeable of such matters) just asked me whether it would be better for her to cash her RRIF and put the money in a TFSA. If she asks herself that question you can bet that a few millions others will do the same.
Thursday, July 3, 2008
The sole purpose of Flaherty's Tax Free Savings Account is to undermine the RRSP as we know it
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Income derived from investment in TFSP will be tax-free until the "circumstances have changed". This will come after the aspiring PM of the day will have promised not to tax income accumulated in TFSP. There is nothing that attracts politicians more than tax-free money. The TFSP introduces a new and inappropriate element in tax policy. It is in contradiction with the well established principle that tax fairness demands that all income received by residents of Canada for income tax purpose be subjected to Canadian income tax.
Politicians are masters at changing the rules in the middle of the game. Any excuse or pretext will do! They are the worst nighmare of anybody,whether they are individuals or enterprises, saving and investing money. It is often said that stability is essentiel for a society to develop and prosper. Policians have yet to learn that stability also includes stability in governmental policies. Things change all the time and will continue to do so. The way to deal with change is not to demolish established policies but to adapt them and modernize them with the least possible damage and costs to the economy and its stakeholders. What the government should do is to reform and adapt the well established RRSP/RRIF rather than introducing new "schemes". That was the underpinning of my proposal to the Liberal Party. I did not even get the decency of an acknowledgement on the part of 15 of the 16 Liberal MPs and senators who received it, with the notable exception of Senator Carstair.
The corporate elite will nest with whoever implements their agenda.. The Marijuana Party could be in charge and they would be cozy with them too.
The RSPs and RIFs of millions of Boomers represent a gathering force of investment capital that potentially threatens the cozy relationships of the corporate elite in Canada. The Flaherty Tax Plan is intended to drive retirement savings into low yield investments where the banks and large corporations can feast on lower cost of capital. And, of course, all at the expense of the 70% of Canadians (75% in AB) who are not CWP.
Volkswagen cultists have been known to have parties where the big event is running the engine of an old Bug that has been drained of oil. Sometimes there's a contest to guess how long the old Bug's engine will run before seizing up.
Why do I mention this example? And why did Flaherty defer the TFSP until 2009? The deferral indicates that he does not want to address the tax revenue loss issue until some years in the future. But in future when there are TFSP plans with $50,000 or $100,000 of capital churning over $10,000 or $15,000 per year of untaxed income, how long will that TFSP "tax bug" be allowed to crawl past the Tax Act?
My guess is 2013 when some start to enjoy untaxed income of $1,000+. Are you old enough to remember the exemption on the first $1,000 of investment income? Another guess is that 2012 will be an election year and Stephen Harper will promise "Never will a Conservative tax the TFSP of Canadians."
By the way, the corporate elite in Canada have been known to nest with Liberals. But may be not anymore, eh?
L M
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