Another Canadian Tax Initiative From Harper

by Mike Godfrey, Tax-News.com, Washington

11 April 2011

Canadian Prime Minister Stephen Harper has added still further to his party's raft of tax break measures, pledging to double the amount Canadians are able to save tax free, in a bid to win over voters ahead of the May 2 election.

If re-elected, the Conservative party would increase the limit Canadians can contribute annually to their Tax Free Savings Accounts (TSA) from CAD5,000 to CAD10,000. Harper first introduced the savings scheme in 2008, and an estimated 4.7m now participate in it. Currently, those who do not use up the full allowance are able to carry forward any unused contribution gap to further years. Harper's initiative does, however, come with a catch. The measure will not be applicable until the Canadian budget has been balanced.

Nonetheless, Harper believes that the introduction of a CAD10,000 limit will provide Canadian families with greater financial security, and grant them greater flexibility to save. The proposal, if implemented, is likely to cost the government an estimated CAD30m in the first year of operation, which the Conservatives call a "moderate" cost.

By reaching out in this way to families, Harper is perhaps attempting to combat the overtures of his main rivals, the Liberal party, who have produced a platform designed to capture the middle class family vote. The Liberals have argued that the economy can only prosper through the strengthening of families, and plan to introduce their own set of tax breaks and initiatives aimed at reducing the burden on this demographic.

Harper has therefore argued for the benefits of his proposal: "The Tax-Free Savings Account lets Canadians keep more of their own hard-earned money to invest in their own priorities". He added that: “Doubling the annual contribution limit will help families save to purchase a car, renovate their home, start a small business or retire with greater financial security and stability".

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