In a number of recent letters, Morton has asked federal Finance Minister Jim Flaherty to suspend both the GST and other provinces' harmonized sales tax (HST) on investment management services.
Since the HST came into effect for financial services in both Ontario and British Columbia last July, he said Albertans -- who have no HST or provincial sales tax -- are at times being forced to pay another province's taxes as they save for retirement.
"Taxes being levied in Ontario are being collected from Albertans," Morton said. "We will not accept Albertans having to pay provincial sales tax ... when they're purchasing services here in Alberta."
In letters, Flaherty has told Morton that residents of Alberta -- or Canadians from other non-HST provinces -- are not included when determining the amount of HST charged on a mutual fund, and "investors in non-harmonized provinces are not unduly affected."
However, Morton said in many cases mutual funds take a "blended" approach, flowing their HST costs out to all investors in the pool equally.
At times, Albertans and other non-HST provinces are lumped in with HST-province investors, particularly Ontario where most of Canada's investment management services companies are headquartered.
He said examining the situation for Albertans made him realize it's not a wise course to charge any consumptive tax on services meant to spur Canadians to save more. It's contrary, he said, to the whole push to boost the retirement income of Canadians.
"Why the heck are we turning around and then levying a tax on financial services which Canadians use to build savings?" Morton said.
It's unclear what support the Alberta minister will receive among his counterparts and Flaherty today -- he acknowledges it's a non-issue for those provinces that have an HST.
However, his plan will likely garner broad support in the financial services industry.
Patrick Farmer of EdgePoint Wealth Management Inc. said his company has already established specific no-HST series funds for people in non-HST provinces, including Alberta, Saskatchewan, Manitoba, Quebec and Prince Edward Island. He said it makes the cost of investing significantly less in those provinces.
Farmer said Morton's plan to cut the taxes is a good idea.
"At a time like this, when investors over 2008 had a very difficult year, and many of them are closer to retirement, the last thing you want is to be taxing savings," he said.
While Morton intends to bring the HST/GST debate to the table, today's meeting in K-Country will likely be dominated by discussions over Flaherty's surprise announcement last week to move to establish a new private-sector pension system. Flaherty also quietly dropped his earlier strategy in addressing what many believe is a looming retirement-income crisis for Canadians, which was to expand the Canada Pension Plan.
The move toward defined contribution Pooled Registered Pension Plans (PRPPs) has outraged unions and other public sector advocates.
On Sunday, the Alberta Federation of Labour held a protest outside the Delta Calgary Airport hotel as the finance ministers headed to Kananaskis for the federal-provincial summit. Dressed as Santa, president Gil McGowan and a couple dozen others urged the ministers to reject the "lump of coal" plans for the private pension plans.
But the plan has been welcomed by financial and investment institutions, as well as Alberta, which has long been pushing for a private, targeted solution for the self-employed and middle-income earners without pensions.
"We think again that any increase in the CPP is unnecessary," Morton said. "Anything you add to the CPP in terms of benefits obviously entails increasing payments. And not just employee payments, but employer payments."
Morton argues that companies, who can choose whether they offer PRPPs or not, will choose to participate to retain employees.
"If employees have a choice between working for companies that have some type of registered pension plan and ones that don't, other things being equal, most of them would take the registered pension plan."
But the debate hasn't died down.
Today's meeting is now set for a showdown between Alberta and other provincial ministers.
On Sunday, six provinces issued a joint statement calling for Flaherty to keep a modest CPP enhancement on the table as part of the package of reforms.
"The provinces expressed concern at recent statements by the federal government suggesting that a modest CPP enhancement was no longer being considered," said the news release from Prince Edward Island, Nova Scotia, New Brunswick, Manitoba, British Columbia and Ontario.
"The provinces have heard strong public support for such an enhancement as an integral part of the retirement income solution. Progress on CPP should not be deferred."
The statement from the provincial ministers said any changes to CPP should be affordable for both employees and employers, and there should be further innovations to provide more Canadians with access to low-cost pensions.
"A harmonized, pan-Canadian framework should be developed, focusing on simplicity and plan member protection," it said.
Ontario Finance Minister Dwight Duncan has said he approves of Ottawa's private plan, but is worried it will come at the expense of a "modest" expansion of CPP to ensure financial stability for Canadians in retirement.
Simon Fraser University professor Jon Kesselman, who focuses on public policy and finance, said the new federal plan ignores the fact that many businesses have already been eliminating or downsizing their company-sponsored pension plans.
"If it's a competitive advantage, why aren't they (companies) doing it now?" Kesselman said. "It puts it all back on the worker."
Kesselman said even though the PRPPs will be available to individuals on their own, most people don't know how much they need to save for retirement, don't have the investment skills, and using conventional approaches, find there's a big drag on returns due to Canada's high investment management fees.
"The returns for the individual investor are much less than the returns for the market as a whole, I presume meaning that it's the institutional investors and the wealthy individuals who do better than average," Kesselman said.
On the other hand, the CPP has lower operating costs, skilled managers and can invest anywhere in the world, he said.
In his letter to provincial ministers, Flaherty noted that today's meeting will also address provincial progress on accommodating the needs of potential Registered Disability Savings Plan (RDSP) beneficiaries with intellectual disabilities who lack contractual competence, and are prevented from opening a plan because they don't have a legal guardian.
Calgary Herald, Mon Dec 20 2010
Byline: Kelly Cryderman