IDA joins chorus of pre-budget recommendations

(September 23, 2003) Ottawa could stimulate higher economic growth rates if it would reduce corporate taxes and increase the limit on RRSP contributions. That’s the message the IDA has delivered to Parliament in its pre-budget submission today.

The IDA commends the federal government on its spending reductions over the past decade, but warns against a return to higher spending, as seen in the last budget.

In the 2003 budget, federal Finance Minister John Manley pledged to allow contributions to rise as high as $18,000 over a three-year span, with this year’s limit rising to $14,500 from $13,500.

“These new levels still fall well short of levels required to maintain adequate income support in retirement for many Canadians,” the IDA says in its submission. “RRSP contribution limits have fallen in real terms since the inception of the program and stand well below levels for comparable programs in other countries.”

The IDA is calling on the federal government to increase the limit on RRSP contributions to $27,000. This follows on the heels of a similar recommendation made yesterday by IFIC, and last week by Advocis and the Conference for Advanced Life Underwriting (CALU).

The IDA also wants the new budget to decrease the capital gains inclusion rate from 50% to 25%, saying this would encourage more privately held ventures to come to market sooner. Currently, the group says, small-business tax relief is too focused on private companies, making venture capitalists reluctant to take a company public.

The IDA also called on the government to lower the tax rate applied to dividends to bring it in line with the U.S. dividend tax treatment. South of the border, this tax rate has been lowered from 39% to 15%. There has since been a recovery in U.S. dividend yielding stocks, which has not been seen in Canada, the IDA points out.

What would you have on your pre-budget wish list? Is raising the RRSP contribution limit the way to go? Share your thoughts about this topic in the Talvest Town Hall on Advisor.ca.

Filed by Steven Lamb, Advisor.ca, slamb@advisor.ca