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TAX AND SAVINGS IMPLICATIONS OF THE CANADIAN REGISTERED RETIREMENT SAVINGS PLANS
Author(s) -
Rashid Muhammad,
Gandhi Devinder K.
Publication year - 1986
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1986.tb01137.x
Subject(s) - economics , incentive , neutrality , personal income tax , labour economics , tax credit , arbitrage , inflation (cosmology) , tax deduction , social security , tax reform , monetary economics , public economics , state income tax , finance , microeconomics , gross income , market economy , philosophy , physics , epistemology , theoretical physics
This paper shows that the net effective tax rate on the Registered Retirement Savings Plans (RRSPs) in Canada has not been inflation non‐neutral because of the combination of the non‐neutrality of various sources of retirement income and the progressivity of the personal tax system. The paper also shows that although the RRSPs provide some tax arbitrage opportunities, these opportunities in Canada are limited due to the non‐tax‐deductibility of interest on mortgage and consumer credits. Finally, on theoretical grounds, the paper argues that the RRSPs may not have provided any incentives for personal savings in Canada.