|Dear Minister Goodale,||October 27, 2005 - By Fax & Mail|
Seniors by the thousands, with fixed income investments have been discriminated against for years. As youre aware the Income Tax Act calls for the full taxation of interest income earned on investments such as guaranteed investment certificates or similar securities. On the other hand, dividends from Canadian sources receive a tax credit and capital gain income is only 50% taxable if there are no offsetting capital losses.
In the 1980's the government of the day removed the $1,000.00 Interest Income deduction This caused little or no reaction at the time from the public at large as interest rates were in the high double digits ranging from 12% - 22% - and the impact of the deduction may have been minor compared to the actual interest income that was earned. Inflation was a companion of the high interest rates but the average investor was able to lock in a high rate of return with minimal risk.
Taking a leap forward to today, a much larger groups of seniors is struggling on fixed incomes partially derived from their interest bearing investments. Such fixed term investments provide average returns of less than 3%, savings accounts at 1% - and are subject to full taxation on each penny earned. When inflation is added the result is a near zero return or negative. This situation may be responsible for normally prudent, unsophisticated individuals being lured into stock market or related investments hoping to increase their annual after tax income. Senior investors however may be ill prepared financially to weather the volatility of the stock market and don't have the remaining lifetime to recoup substantial losses. In addition the misused term guarantee has had a disastrous effect on the confidence of the conservative investor a case in point is the recent Portus debacle where any guarantees were meaningless in the face of apparant fraud.
As a counter to this drift in confidence, and to deliver a more equitable tax
treatment on investment interest income, I emplore you to re-establish an Interest
Income Deduction in your next budget. The net benefit would put a tax related
credit directly into the hands of our senior citizens and provide an incentive
to use lower risk investments rather than gambling on variable returns when
they can least afford to.