Canadian Tax Deferred Savings Plans and the Foreign Property Rule

David Burgess and Joel Fried
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Joel Fried: The University of Western Ontario Department of Economics, https://economics.uwo.ca/
Authors registered in the RePEc Author Service: Audra J. Bowlus () and Shannon Seitz ()

No 9801, University of Western Ontario, Departmental Research Report Series from University of Western Ontario, Department of Economics

Abstract: This paper argues that the Foreign Property Rule, which limits the foreign content of a Registered Savings plan to no more than 20% of book value, should be removed as quickly as possible. Given the globalization of financial markets, the FPR does not protect what it meant to protect - a pool of savings for investment in Canada. Instead, it distorts the allocation of credit among firms, and forces agents to use more costly instruments - derivatives - to achieve desired foreign risk exposure. Since the FPR lowers the return on registered savings without benefiting any identifiable group, removing it would be an unequivocal gain to Canadians.

Date: 1998
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