Quebec academic slams tax shelters

By Anaïs Chabot | April 28, 2011 | Last updated on September 15, 2023
3 min read

Noted Quebec economics professor Léo-Paul Lauzon says the government should abolish the tax shelters for the good of the collective interest of Canada.

Chair of Socio-Economics at the University of Quebec at Montreal, Lauzon, well-known for his sometimes scathing pronouncements, has released the findings of a study on the merits of RRSPs TFSA and other tax shelters.

Based on data from Statistics Canada and Canada Revenue Agency (CRA) and on articles published between 1994 and 2011 in some newspapers in Quebec, Lauzon argues that “our politicians go beyond hypocrisy by improving and introducing more tax shelters in order to encourage Canadians to save, while in reality, these tax privileges are used primarily for the wealthy to save more; they are financed by public funds.”

RRSP for “a wealthy few,” said Lauzon According to estimates from an economics professor at UQAM, the RRSP program costs $20 billion per year in federal revenue, not to mention the $4 billion in revenues lost by the government of Quebec. Lauzon says the program serves only “a wealthy few.”

Indeed, in his study, those earning $100,000 or more, make up 5.4% of taxpayers, while contributing most to their RRSPs, 35% of total contributions. Meanwhile 75% of taxpayers earn $50,000 or less, while accounting for only 22.9% of contributions.

RRSP contributions in 2007 in Canada
Revenue % who paid % of the total number of taxpayers % of total contributions
$30,000 and less 7,6 53 5,8
$40,000 or less 11.5 66 13
$50,000 or less 15 75 22.9
$100,000 and over 68 5.4 35

“RRSPs, like all other tax shelters that cost billions of dollars annually in public funds, are used primarily by a wealthy few,” Lauzon says.

Regarding the voluntary retirement savings plan (VRSP), Lauzon thinks it will force the average taxpayer to invest even if they cannot afford it. He says the VRSP will not be voluntary, but mandatory. He also denounced the fact that employers do not participate in the VRSP, as they do in some countries that have introduced similar programs, namely Great Britain and Australia. For him, this will only create more indebted households. The Conservative government blamed Lauzon does not mince words when it comes time to talk about the Harper government’s achievements in the areas of tax shelters. He said the Conservatives have contributed to impoverish households, wanting to help “his pals.”

Indeed, he denounced the Conservative measures that led to the improvement of RRSPs, the TFSA creation, tax cuts for business and, soon, will increase the maximum annual contribution of the TFSA. And he criticized Finance Minister Jim Flaherty, who said that Canadians want to contribute more to the Canadian Pension Plan.

Abolish the RESP, the author wishes Lauzon said that the numbers he puts forward do not fully reflect the truth, since he has not had access to data concerning individual pension plans (IPP). Based on the data he was able to collect, he says there is ample reason to abolish the TFSA, the RRIF and even RESPs.

Instead of the RESP, he proposes following the European model, with the state providing free university education.

The report does not suggest the abolition of the RRSP and VRSP, but hopes that the annual maximum contribution is reduced, limited to a ceiling of $5,000, and that the VRSP is truly voluntary. Otherwise, Canada would perpetuarte “a total lack of fairness at the expense of present and future generations,” he says.

Read the entire study.

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Anaïs Chabot