02/24/2015 09:07 EST | Updated 04/26/2015 05:59 EDT

Boosting tax-free savings accounts may cost billions: budget watchdog

Boosting the maximum Tax Free Savings Account contribution could cost the federal treasury billions in lost revenue, according to the Parliamentary Budget Office.

A new report from the budget watchdog says the fiscal impact of the plan on tax revenues will be $1.3 billion in 2015 — two-thirds of which will be borne by the federal government, with the remaining third carried by the provinces.

"By 2080 the TFSA fiscal costs project to increase ten-fold, reaching 0.57 per cent of GDP," the report concludes.

The report also says wealthier Canadians are more likely to benefit from the plan.

"Benefits skew to higher income, higher wealth and older households. Low-income households’ benefits range from half to one-fourth the median between 2015 and 2080," it states.

That gap will become wider over time as the contribution limit rises, the report predicts.

"TFSA gains for low- and low-middle income households project to plateau in 2040,while PBO estimates that higher-income households will benefit from continued annual increases TFSA contribution room."

During the 2011 election campaign, the Conservatives pledged to double the limit as soon as the budget was balanced. Currently, the maximum annual contribution is $5,500.

Doubling limits would make plan 'much more regressive': report

Doubling would make the tax plan "much more regressive," according to the budget watchdog, with wealthier households likely to benefit by as much as 4 per cent of after-tax income in 2060 — about ten times what less well-off households could expect to gain.

Those findings are in line with a new report released by the Broadbent Institute on Tuesday, in which economist Rhys Kesselman, found no justification "on either economic or equity grounds" for doubling the contribution limit without "correcting deficiencies of the current scheme."

To do so, he said, "would be a dereliction of fiscal responsibility."

According to Kesselman's analysis, which used data compiled from Canada Revenue Agency and Finance Canada reports, Canadians earning less than $200,000 a year would be unlikely to take advantage of the higher limit.

In his report, he warns that Ottawa could lose up to $15 billion a year in revenues when the program fully matures in 40 to 50 years, with provincial coffers taking a combined hit of $9 billion.

"The great majority of Canadians would enjoy no benefits," Kesselman concluded.

"In fact, they would bear the burdens of an expanded TFSA by enduring the reduced public services or bearing the increased taxes needed to offset the lost revenues."

Approximately 11 million Canadians have opened the savings accounts since their inception in 2009.