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(Bloomberg) -- An election promise by Canada’s Conservative Party that would allow individuals to avoid income taxes on some investments in domestic companies is being lauded in Toronto’s financial district.

Conservative Leader Pierre Poilievre says that if his party wins the April 28 election, his government would expand the program of Tax-Free Savings Accounts, giving people the right to contribute an additional C$5,000 ($3,500) a year — provided that extra money is invested in Canadian businesses.

The tax-free accounts were created by the previous Conservative government of Stephen Harper. Money invested in TFSAs can grow and later be withdrawn without incurring tax on capital gains, dividends and other investment returns.

The proposal “gets to the heart of the issue,” of Canadian firms being starved of money to grow, said Greg Taylor, chief investment officer at Purpose Investments. “Canadian companies have been frankly underfunded, and anything that we can do to get capital back into the hands of the companies will be a big help,” Taylor said.

In the middle of an escalating trade war with the US, the Conservatives’ idea encourages a shift in investing habits. Canada once had investment restrictions on foreign assets for pension funds and individual retirement accounts, but those rules were loosened long ago, causing investors to diversify their portfolios outside the country.

Canadians are allowed to add C$7,000 to their TFSAs this year. An additional C$5,000 of contribution room, along with the invest-in-Canada rule, would provide a lift to the S&P/TSX Composite Index at the margin, Taylor said. “Even creating more demand for Canadian stocks is going to be a help at the end of the day.”

Canada’s primary stocks benchmark is up about 1.7% this year, outperforming the S&P 500, thanks to a sharp selloff in US tech stocks. The last time the TSX beat its American counterpart in a full calendar year was 2022 — and it has done so only twice in the past 15 years.

Jay Bala, portfolio manager and co-founder of AIP Asset Management in Toronto, said the Conservatives’ proposal can’t hurt, but he’d like to see politicians be even bolder, given repeated threats from US President Donald Trump against Canada’s economy and sovereignty.

“This is one of these unique opportunities in the history of a country where you can make significant changes,” Bala said, adding that cutting capital gains taxes would provide a bigger boost.

“You can make a significant change, which would then impact the country’s wealth for the 100 years to come. And so I think it’s really a question now of who’s willing to be courageous enough to make those changes?”

Others say that larger TFSAs would have only a limited effect on the overall market.

“Even if you incentivized the domestic retail market to invest more in Canadian stocks, that may not be enough to move the market, given the outsized effect of international retail and institutional investors in the TSX,” Bloomberg Intelligence analyst Gillian Wolff said.

Other countries, including France, have similar tax-advantaged plans that encourage domestic investment. France’s Plan d’épargne en actions allows French residents to put as much as €150,000 ($162,000) into a tax-advantaged account that invests in French and European companies. Poilievre’s proposal takes a similar approach.

“Keep the money in Canada. What that’ll do is increase investment in Canadian companies and hopefully drive foreign investment back into Canada as well because our economy will be more competitive,” said Eli Yufest, executive director of the Canadian ETF Association.