Hockin calls for end to GST on fund fees

IFIC president Tom Hockin has issued a letter to his colleagues in the mutual fund industry asking for help in the campaign to scrap the GST on fund management fees.

Hockin, who is retiring from IFIC next month, says the issue affects the interests of all Canadians who invest in mutual funds, and should be promoted and publicized, especially during the current federal election campaign.

Recent research from the Bank of Canada and others has identified a trend among Canadians towards “passive” savings, Hockin said, relying on the increase in value of real estate and other investments, as opposed to organized “active” savings.

“At IFIC’s recent annual conference, I encouraged you to urge the federal government to recognize this worrisome trend and undertake initiatives that will assist Canadians to continue to save for retirement,” the letter reads.

“This is particularly important as more and more members of our aging population rely on self-funded, defined contribution plans to support them through their golden years. Given that mutual funds are the retirement-savings vehicle of choice for millions of Canadians, removing the GST on mutual fund management fees could be such an initiative.”

Earlier this month, CI Financial issued a letter to the leaders of all federal parties, calling on them to eliminate the GST charged on the management of mutual funds.

“The GST was introduced as a consumption tax, yet savings are not consumption,” said Stephen A. MacPhail, CI president and COO. “This unfair application of the GST is draining an estimated $750 million a year from the nest eggs of Canadians and we are asking Canada’s political leaders to put a stop to it.”

“It’s important that these Canadians are aware they are paying what amounts to a hidden and unjustified tax on their savings,” MacPhail added. “We also believe that people should take advantage of the federal election campaign to speak to their local candidates about this issue.”

There is some skepticism among advisors that this initiative will attract any public, or political, support. “A service, regardless of what it is, is still a service and subject to the GST under that definition,” said one advisor writing in Advisor.ca’s Town Hall.. “If I just had to pay GST to my lawyer for registering the deed to my house, why wouldn’t I pay GST for any other professional service?”

“Anything that reduces costs — especially if it doesn’t affect my income — is a good thing,” another advisor added. “But I disagree that it makes sense. Savings aren’t being taxed — it’s the management of a portfolio that’s being taxed.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com