The truth about Poilievre’s ‘Canada First’ TFSA plan | About That

Summary

Pierre Poilievre’s proposal to increase the TFSA contribution limit to $12,000, with the stipulation that the extra $5,000 be invested in Canadian companies, aims to boost the Canadian economy. However, the plan overlooks key financial realities: investing in stocks doesn't directly fund businesses, the definition of a 'Canadian company' is unclear, and the majority of Canadians either don't use TFSAs or can't afford to max out their contributions. The proposal also risks reducing investment diversification and returns, as Canadian markets typically underperform compared to global markets. Ultimately, the plan may have limited impact on both individual investors and the broader economy.

Takeaways

• 😀 Pierre Poilievre's proposed Canada First TFSA top-up promises an extra $5,000 in contribution room for Canadian investors, but only if the money is invested in Canadian companies.
• 😀 The goal of the TFSA top-up is to drive investment into Canadian companies, potentially boosting local economies by funding factories, tools, and wages.
• 😀 Only around 50% of Canadians even have a TFSA, and only about 8% of those max out their contributions, which limits the potential impact of the proposed policy.
• 😀 The additional $5,000 in TFSA contributions would bring an estimated $7.5 billion in new investment if all maxed-out account holders were to participate.
• 😀 The money invested through this TFSA top-up wouldn’t directly benefit Canadian companies, as stock purchases on the secondary market don’t inject money into the companies themselves.
• 😀 For companies to benefit from this plan, they would have to issue new shares, which is not the majority of trading on the stock market.
• 😀 There’s no clear definition of what constitutes a 'Canadian company' under the plan, which could lead to confusion over which investments qualify for the TFSA top-up.
• 😀 The performance of the Canadian stock market doesn’t match that of global markets, especially the U.S. market, potentially leading to lower returns for Canadians who follow Poilievre’s suggestion.
• 😀 Investing in Canadian stocks could have an opportunity cost, as the Canadian market does not perform as well as international markets like the U.S., leading to lower financial returns.
• 😀 Increasing the TFSA contribution limit might benefit wealthier Canadians, but most Canadians do not have the financial means to max out their TFSA or even contribute $5,000.
• 😀 While the TFSA top-up could benefit those who can afford it, the plan may not make a significant impact for the majority of Canadians, as many cannot afford to invest in a TFSA in the first place.

Q & A

What is Pierre Poilievre's idea regarding the TFSA top-up?

Pierre Poilievre proposes a 'Canada First' TFSA top-up, which would allow Canadians to contribute an additional $5,000 annually to their TFSA, provided the money is invested in Canadian companies. This would increase the tax-free savings account contribution limit from $7,000 to $12,000 per year.

How would Poilievre's plan impact Canadian businesses?

Poilievre claims that the additional investment would bring billions of dollars into Canadian companies. These funds would then be used by businesses to invest in factories, equipment, wages, and other resources, which would strengthen Canada's economy and make it more self-reliant.

What is a TFSA and how does it differ from an RRSP?

A TFSA (Tax-Free Savings Account) allows Canadians to invest and grow their savings without being taxed on the growth, unlike an RRSP (Registered Retirement Savings Plan), where withdrawals are taxed as income. However, the TFSA has a contribution limit, which in 2025 is $7,000 annually.

How many Canadians currently have a TFSA?

According to the Canada Revenue Agency (CRA), about 18 million Canadians have a TFSA.

What percentage of TFSA holders actually max out their contributions?

As of the 2022 tax year, only about 8% of TFSA holders, or around 1.5 million people, maxed out their TFSA contribution limit of $7,000.

What is the misconception about the investment in Canadian companies?

A major misconception in Poilievre's plan is that investing in Canadian stocks through TFSAs would directly inject money into the companies. In reality, when buying shares on the stock market, the money simply transfers between investors and does not directly benefit the company unless new shares are issued.

What role does the stock market play in Poilievre's plan?

In the stock market, the money involved in trading stocks generally flows between investors, not directly into the companies themselves. Unless a company issues new shares, the company does not receive any of the money from stock transactions in the secondary market.

What challenge is posed by defining what qualifies as a 'Canadian company'?

Poilievre's plan faces uncertainty regarding how to define a 'Canadian company.' Factors like where the company’s headquarters are located, where they make most of their revenue, and whether they are listed on the Toronto Stock Exchange complicate this definition.

How does investing in Canadian stocks compare to international stocks?

The return on Canadian stocks is generally lower than that of international stocks. For example, an ETF tracking Canadian companies (XIC) has an average annual return of 8.12% over 10 years, while an ETF tracking the S&P 500 (VFV) has an average return of over 14% in the same period.

Who is most likely to benefit from Poilievre’s TFSA top-up plan?

Wealthier Canadians who are already able to max out their TFSAs would benefit most from the TFSA top-up. However, the average Canadian, especially those who don't have enough savings to contribute the full amount, would likely see little benefit from this plan.