270
Views
0
CrossRef citations to date
0
Altmetric
Original Articles

The Canadian tax-free savings account: a programme to help the rich get richer?

&
Pages 728-731 | Published online: 29 Oct 2015
 

ABSTRACT

This article examines participation in the Canadian tax-free savings account (TFSA), implemented in 2009, and its potential impact on wealth inequality in Canada. Data from the 2012 Survey of Financial Security is used to estimate probit, tobit and Heckman probit selection models to test the hypothesis that high-income earners and wealth holders are the most likely recipients of the benefits associated with the TFSA. Empirical results highlight the significance of net worth as a key determinant of both participation in and contribution levels of the TFSA. The results are expected to be relevant to public policy-makers concerned with reducing inequality and those endeavouring to encourage savings for all socio-economic groups.

JEL CLASSIFICATION:

Notes

1 For more details on the TFSA, see http://www.tfsa.gc.ca/

2 Canada, Department of Finance, ‘Tax-Free Savings Account: Savings Just Got a Whole Lot Easier’ (www.tfsa.gc.ca/tfsapamphlet-eng.html) In Donnelly, M. and Young, A. (Citation2012): 361–362.

3 The logarithmic transformation of the dependent variable, the tax-free savings account (TFSA) balance, is used to reduce skewness and kurtosis in order to address the normality assumption of the tobit model.

4 A limitation of the data is that the TFSA balance is at the household level. Thus, it is conservatively assumed that households with a TFSA balance of $20 000 or higher are maximizing the TFSA limit.

5 Household refers to Statistics Canada’s (Citation2012) term family unit, consisting of economic families and persons not in economic families. An economic family is a group of two or more persons living in the same dwelling and related by blood, marriage, common law or adoption.

Log in via your institution

Log in to Taylor & Francis Online

PDF download + Online access

  • 48 hours access to article PDF & online version
  • Article PDF can be downloaded
  • Article PDF can be printed
USD 53.00 Add to cart

Issue Purchase

  • 30 days online access to complete issue
  • Article PDFs can be downloaded
  • Article PDFs can be printed
USD 205.00 Add to cart

* Local tax will be added as applicable

Related Research

People also read lists articles that other readers of this article have read.

Recommended articles lists articles that we recommend and is powered by our AI driven recommendation engine.

Cited by lists all citing articles based on Crossref citations.
Articles with the Crossref icon will open in a new tab.