{"id":266212,"date":"2018-05-10T10:30:07","date_gmt":"2018-05-10T14:30:07","guid":{"rendered":"https:\/\/policyoptions.irpp.org\/issues\/is-the-tfsa-program-serving-all-canadians-equally\/"},"modified":"2025-10-07T22:05:08","modified_gmt":"2025-10-08T02:05:08","slug":"is-the-tfsa-program-serving-all-canadians-equally","status":"publish","type":"issues","link":"https:\/\/policyoptions.irpp.org\/fr\/2018\/05\/is-the-tfsa-program-serving-all-canadians-equally\/","title":{"rendered":"Is the TFSA program serving all Canadians equally?"},"content":{"rendered":"

In the federal budget speech of February 26, 2008, Finance Minister James Flaherty introduced a new savings plan, the Tax Free Savings Account (TFSA), stating<\/a>, \u201cMr. Speaker: The budget is balanced. Taxes have been cut. And Canadians will now have a powerful new incentive to save money, tax-free: the Tax-Free Savings Account that we are announcing today.\u201d<\/p>\n

Those who are 18 years or older and have valid Canadian social insurance numbers are eligible to contribute<\/a> after-tax dollars into these accounts throughout their lives. This unique savings vehicle should enable Canadians to save without being concerned about their eligibility for federal income-tested benefits and credits. Yet, since the plan\u2019s inception, there has been much debate over the merits of TFSAs.<\/p>\n

One of the most important arguments against the TFSA program is that it is less equitable than claimed. Many Canadians cannot afford to contribute to the program, so they get no direct benefit. But they could indirectly experience a negative effect, because TFSAs reduce the government\u2019s tax revenues. A decline in revenues could mean cuts to services, and such reductions are more likely to affect those in the mid- to low-income level. Thus the program\u2019s benefits are far from equally distributed.<\/p>\n

In this article I review briefly the distributional impact of the TFSA program. Data from the Canada Revenue Agency and the 2012 Survey of Financial Security (SFS) give an idea of the impact and take-up of TFSAs.<\/p>\n

The participation rate among those eligible in 2013 was 39.49 percent overall in Canada (figure 1). The top three provinces by take-up are British Columbia (43.76 percent), Ontario (42.90 percent) and Alberta (41.85 percent) (figure 1). As figure 1(a) shows, there are considerable differences in participation rates among provinces.<\/p>\n

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