Canadian Tax Deferred Savings Plans and the Foreign Property Rule
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.
Citation of this paper:
Burgess, David and Joel Fried. "Canadian Tax Deferred Savings Plans and the Foreign Property Rule." Department of Economics Research Reports, (1998).