Canadian investors currently hold about $300 billion in U.S.-listed ETFs, representing roughly just over a quarter of the $1.15 trillion in total ETF assets held by Canadians, according to CETFA\u2019s written submission for pre-budget consultations in August. <\/p>\n
\u201cWe\u2019re on the brink of a serious issue, and if we don\u2019t get ahead of the ETF share issue, in 15 or 20 years it\u2019s not out of the realm of possibility that we\u2019re going to see a hollowing out of our ecosystem,\u201d said Eli Yufest, CETFA executive director. He added that the amount Canadians hold in U.S. ETFs has grown by roughly $100 billion in just two years.<\/p>\n
CETFA\u2019s recommendation of a Maple Investment TFSA is for a new TFSA category to be designed to encourage Canadians to invest in Canadian-listed stocks and ETFs, with a federal matching grant of up to $1,000 for households earning under $90,000 a year. Investors would not be eligible for the grant if they were to invest in a U.S.-listed product instead, said Yufest.<\/p>\n
Yufest said the proposed Maple Investment TFSA has a dual purpose: to encourage Canadians to invest more of their savings instead of holding them as cash by calling it an Investment TFSA and to incentivize Canadians to invest at home.<\/p>\n
The $1,000 government match could also be adjusted to a different rate, or Ottawa could test it out with a lower-cost pilot, such as a 20 per cent match instead, according to the CETFA proposal. <\/p>\n
Such a program would cost the government tax revenue, but could present an upside to Canadian companies that could see higher levels of investment, Yufest said.<\/p>\n
\u201cThere is a cost, but we don\u2019t believe it\u2019s prohibitive enough to not consider the idea, and frankly, we can\u2019t think of a better time, given all the geopolitical noise,\u201d he said. \u201cWe need to figure out how to stem the flow to the U.S. (and) think about how to repatriate the money.\u201d <\/p>\n
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CETFA\u2019s other recommendation is around capital gains taxes on ETFs. In 2022, the Canada Revenue Agency implemented a change in the system, so that when one investor sells ETF units and triggers a capital gain, that gain is distributed across the remaining unitholders (including buy-and-hold investors) rather than just by the one investor who sold. This means the other unitholders could be taxed on gains they did not realize.<\/p>\n
\u201cThey haven\u2019t triggered any capital gains, so they shouldn\u2019t be paying someone else\u2019s taxes,\u201d Yufest said, adding that this taxation policy does not exist in the U.S., making American funds more competitive. <\/p>\n
\u201cWe have to level the playing field with the U.S.,\u201d said Yufest. <\/p>\n
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