Tax wish list: A selection of pre-budget submissions

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It’s the time of year when wish lists come out—and no, I’m not talking about kids and their letters to Santa. Rather, I’m referring to the pre-budget submissions that go to the House of Commons Standing Committee on Finance.

While I didn’t go through all 400+ submissions, I did scope out a broad array of those focused on individual tax and income issues. Given the razor-thin remaining surplus, there may not be much more in the budget, but let’s speculate.

❏ Doubling TFSA room

More than a few asked for the follow-through of the Conservative party’s 2011 election promise to double TFSA room. Whether that means $10,000 (based on the $5,000 level in 2011) or $11,000, this is probably the item most certain to make it into the budget. Some even suggest that an increase in RRSP room would be a fitting complement.

❏ Latest RRSP contribution age

Owing to seniors’ continuing participation in the workforce and ongoing improvements to life expectancy, a number of submissions are looking for the RRSP contribution age limit to be lifted, perhaps to 75.

❏ RRIF minimums

A recurring theme over the last half-decade has been requests for an increase in the mandatory minimum withdrawal age beyond the current age 71—perhaps to 75.

❏ Pension income splitting

The age-65 requirement for RRIF income should be eliminated to put senior spouse couples on an equal footing, whether they’re receiving RRIF or RPP income.

❏ Vulnerable seniors

Numerous contributors noted the plight of low-income seniors, especially women. The Canadian Association of Retired Persons suggests creating an “equivalent to spousal allowance” for single seniors in need, and making the Caregiver Tax Credit refundable.

❏ Payroll taxes and group RRSPs

Against the backdrop of the implementation of PRPPs, IFIC requests that group RRSPs be placed on a level footing with other workplace savings plans. Specifically, employer contributions should be exempt from payroll tax, CPP and EI.

❏ Increase the CPP death benefit

The maximum CPP death benefit was reduced from $3,580 to $2,500 in 1998, where it remains today. Since this benefit is being designed for end-of-life needs, the Funeral Services Association of Canada asks that the amount be reset to $3,440, based on interim inflation, and be annually indexed hereafter.

❏ Stretch charitable tax credit

The Association of Fundraising Professionals supports the augmentation of the charitable tax credit by 10% for donations that exceed a donor’s previous highest annual giving level. To maintain focus on the middle-income population, the eligible donation amount would be capped at $10,000.

❏ Credit card fees and charities

Imagine Canada wants to limit or eliminate fees on donations made by credit card. In support, it cites precedents from Australia and the EU, and the current Senate study of Bill S-202 that proposes to regulate and eliminate such fees for registered charities.

❏ Donations by will

Recent amendments provide flexibility for charitable donations made by an estate, but impose a rigid deadline of 36 months after death to qualify for that flexibility. The Canadian Association of Gift Planners recommends that tax authorities be given administrative latitude to extend the time period in appropriate circumstances, such as illiquid assets or litigation.

❏ Extend the deemed disposition rule for trusts

Law firm Davies Ward Phillips & Vineberg LLP points out the 21-year deemed disposition rule introduced in 1971 was arbitrary, and is outdated. It suggests the period be extended to 50 years from the death of the settlor or contributor.

❏ Capital gains rollover

The IIAC proposes a rollover provision for capital gains, contingent on reinvestment of sale proceeds into common shares of small-listed Canadian companies within six months.

❏ Adjust personal income tax thresholds

As a means to attract talented immigrants, Deloitte suggests increasing the threshold at which top tax rates apply, to be implemented in stages over five to 10 years once the budget is balanced.

❏ Simplified tax system

The Chartered Professional Accountants of Canada would like to see a thorough review of the tax system, perhaps on the scale of the Carter Commission in 1966. In the meantime, it advocates a reduction in personal tax rates once economic conditions allow, replacing the difference with consumption taxes that better align us with the tax systems of our major trading partners.

❏ Financial literacy

Past and continuing efforts to improve financial literacy were lauded from all corners. Still, it’s in the early stages, and requires continued focus and resources.