IIAC recommends innovative tax policies and investment schemes to boost Canada's economic growth
The Investment Industry Association of Canada (IIAC) has submitted its 2025 pre-budget recommendations to the House of Commons Standing Committee.
The IIAC urges the federal government to implement several key measures to strengthen Canada's economic framework:
Introduce a Program Similar to the UK Enterprise Investment Scheme (EIS)
The IIAC recommends establishing a program similar to the UK Enterprise Investment Scheme (EIS) to stimulate investment in early-stage, unlisted businesses with high growth potential.
This program would provide personal income tax relief to individuals investing in EIS-qualifying companies, capital gains tax disposal relief if the shares are held for more than three years, and a capital gains tax exemption on asset sales if the proceeds are reinvested in EIS-eligible shares.
Such a program would drive innovation and job creation.
Enhance Tax-Assisted Retirement Savings
The IIAC suggests increasing the age limit for contributions to tax-deferred retirement savings vehicles and the commencement age for RRIF withdrawals.
Additionally, they propose lowering the mandatory RRIF annual withdrawal rates for each age group, with the ultimate goal of eliminating mandatory withdrawals entirely. This would give Canadians more flexibility and control over their retirement savings.
Re-balance the Tax System
The IIAC advocates for a shift in Canada’s tax system from income and profit taxes, which can hinder work and investment, towards consumption taxes that are less economically damaging. They call for reversing the Budget 2024 capital gains tax hike and abolishing the tax on share buybacks.
Conduct a Comprehensive Federal Tax System Review
The IIAC emphasizes the need for an independent, thorough review of the federal tax system to ensure it follows sound tax policy principles. They highlight that previous incremental changes have created a complex and costly compliance landscape.
A comprehensive review, similar to those conducted in other countries, is necessary to streamline the system.
Review Federal Spending
The IIAC recommends a detailed review of federal spending, including tax expenditures, to identify savings and address the financial challenges posed by an aging population. This review would help balance the budget and improve fiscal management.
Establish a Path to Budget Balance
The IIAC stresses the importance of setting a credible path to budget balance, aiming to reduce the federal debt-to-GDP ratio below pre-pandemic levels. They note that interest payments, projected at $47.2bn for fiscal 2023-24, represent missed opportunities to fund public services and reduce taxes.
High government debt also competes with private businesses for investment capital, driving up interest rates and reducing private sector investment, which hampers productivity growth.
