Finance Committee on Nov. 27th, 2013

[Louis Plamondon, Bloc, Bas-Richelieu—Nicolet—Bécancour, QC]

Thank you, Mr. Chair. Thank you for allowing us to discuss this bill too.

I have just heard Mr. Caron present the NDP amendment. We share the same goals and we would have supported it if we had the right to vote on the amendment. This amendment completely eliminated the clauses in question; instead of eliminating all the clauses, our proposal is to amend the rate to go from 15% to 10% and then to 5%. For the next two years, we would like it to decrease by one-tenth of one percent, meaning that it would go to 14.9999%.

We deplore the fact that no negotiations took place with government, specifically with the Government of Quebec, since these labour-sponsored funds are extremely popular, and useful for Quebec's economic development. There were no negotiations; this is a unilateral decision. Therefore, for the next two years, the decrease would start with a minimal amount, but discussions would certainly start with a view to coming to an agreement. Perhaps the decrease could be up to 10% or similar, as the NDP suggests. But we have to sit down around a table and we have to avoid throwing out a system that was working so well, that had so many benefits and that cost the government practically nothing.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Plamondon.

Colleagues, I will advise you that the vote on amendment BQ-1 applies to amendment BQ-2.

(Amendment negatived [See Minutes of Proceedings])

(Clause 59 agreed to)

Colleagues, for clauses 60 to 123, I do not have another amendment until clause 124.

Ms. Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

We are fine to group clauses 60 to 72.

[The Chair, Conservative, James Rajotte]

Is the committee okay with that?

(Clauses 60 to 72 inclusive agreed to)

(On clause 73)

I am now dealing with clause 73.

You have the floor, Mr. Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Let me tell you how disappointed I am that we have already voted on some of the elements of the labour-sponsored funds tax credit without even having heard a single reply to the arguments I presented. I feel that I laid out a detailed analysis of the impact this will have, but the government side stays completely silent and simply votes to end it.

The evidence it has presented is very weak. I find it a real pity to see how lightly the government takes the impact this will have on the Quebec economy, on the Canadian economy and on the success of its own venture capital action plan. By accepting the proposal from the two Quebec funds, it could have significantly improved the positive effect of its own plan to develop Canadian venture capital. But all we get from the Conservative government is silence.

A number of government members, especially those with constituencies in less urban regions, should be affected by one other aspect. I see some of those members in front of me. I am thinking of the effect of those funds through regional funds that invest directly, either development capital or venture capital, in regions outside Montreal and Quebec City, for example. Eastern Quebec is currently trying to diversify its economy. With those funds, it can do so. If the government is looking to reduce the dependence on, or the amount of seasonal work in those regions, it would do well to support the positive effects these funds bring through those regional funds.

Why is the government content to vote blindly for a measure that—I repeat—will have such profound effects without having done the least amount of study about the elimination of this tax credit? I am extremely disappointed to have received no answer. I hope I will get one before the end of this vote, or another vote on another aspect of the elimination of the tax credit. If not, I will understand that the government is acting in a doctrinaire fashion without considering the economic realities at the same time as it claims to be the government of economic prosperity and jobs. By rejecting the proposal presented to it under the venture capital action plan, it is directly and negatively affecting job creation in Quebec and in Canada.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you. Merci.

Is there further discussion?

(Clause 73 agreed to)

Colleagues, do you want me to group any further clauses? We do not have an amendment until clause 124.

Can we carry clauses 74 to 79?

[Some hon. members]

Agreed.

[The Chair, Conservative, James Rajotte]

(Clauses 74 to 79 inclusive agreed to)

(Clause 80 agreed to)

Is there any further grouping I can do, colleagues?

[Peggy Nash, NDP, Parkdale—High Park, ON]

Clause 81 is separate.

(On clause 81)

[The Chair, Conservative, James Rajotte]

There is discussion on clause 81.

Monsieur Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I assume that the government is going to remain silent about the impact that the elimination of the tax credit is going to have. That is the latest clause we are discussing.

I would like to know whether the government really was impressed by the minister's performance when he appeared on Monday. The minister was asked about the impact of eliminating the tax credit and, I would like to remind you, his answer was that it was not working. His justification for eliminating this tax credit is that it is not working. Why is it not working? Because it is not working!

All the evidence, all the proof, all the studies, except the one by the OECD and the one by Jack Mintz, show the opposite. I read the study from the University of Calgary. Mr. Mintz had absolutely no understanding of the complexity of the two Quebec funds and of the level of success and the level of support that those two funds have in developing innovation and business, and in keeping companies going in Quebec. Even the Minister of Finance was not able to come before us and justify the reasons why this credit should be abolished. He had a golden opportunity to do so, but he did not. That was right after the two meetings we had with people who talked about the matter. There was a representative from iNovia, a fund that invests directly in innovation. Mr. Arsenault told you about the glowing successes of the fund, the glowing successes that could not have happened, as he told us himself, without support from the Fonds de solidarité FTQ.

At the moment, the government is making a real mess of its desire to work to create jobs and to achieve regional economic success. Basically, this is nothing more than grandstanding on its part. It had the opportunity to support a model that works. Not only that, if the government had been consistent in its desire to get the economy working across the country, from coast to coast, it could even have encouraged the expansion of the model to other regions. Those regions too are looking for more economic diversification; they also need many more diversified jobs and they too are looking for more support from the federal government for innovation, for research and development, and for areas of cutting-edge technology that still carry enormous risks. But they are the reason these funds exist; they support those areas.

I know that the government is going to stay silent again. It is regrettable, but I think it shows what its true colours really are when the time comes to address the questions of economic development and job creation. A lot of fine words are spoken in the House, but when it is time to support the development in a tangible way, it is ready to do away with any model that does not conform to its dogmatic approach and its ideology.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Caron.

Is there discussion?

Mr. Saxton.

[Andrew Saxton, Conservative, North Vancouver, BC]

Chair, since my colleague opposite wishes to engage us on this particular topic, I just want to point out which issues were already pointed out when witnesses were before us in committee, which is that this particular venture capital plan is no longer achieving its desired results. It's no longer achieving its original purpose. It has become simply a tax-driven investment plan, which is encouraging the inefficient use of capital.

However, having said that, as a government we recognize the importance of venture capital. We recognize the importance of venture capital when it comes to creating jobs in our economy, which is why we plan to replace this particular labour-sponsored venture capital corporation with a new venture capital action plan, which will be well funded, and we expect to achieve its desired results.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Saxton.

Mr. Caron, the floor is yours.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I would like to thank Mr. Saxton for at least saying something before the voting ends on this matter. His comment actually corresponds to mine, that the government claims that the tax credit is not working and is no longer meeting its objectives. What does the government use as a basis for saying that? There is nothing, except one study from the University of Calgary that Mr. Mintz supports and that he presented. But we have two studies, one from Deloitte & Touche Inc. and one from SECOR-KPMG, that argue that, on the contrary, it has been a success.

This is not a tax shelter like the other tax shelters we hear about. It is a fund into which small savers invest a small portion of their paycheques. The government is supposed to be encouraging people to save; this is an ideal way to do it. Not only does it encourage saving for retirement, it does so productively. Instead of putting their money into speculative funds or into funds where the money is going to lie dormant because they hold mostly stocks and bonds that provide no direct support to the economy, these people are deciding to save their money by putting it into venture capital funds.

Yes, the government has established a venture capital action plan for a period of 10 years. It has invested $400 million. If it really wanted to make that venture capital fund work, it would have jumped with both feet onto the offer that the two Quebec funds made, to invest $2 billion into the fund.

You have a choice. Either you can have a venture capital action plan that starts at $2.4 billion or that would be guaranteed to reach $2.4 billion with the cost of the tax credit reduced by 30%. Or you can have the current plan whereby the tax credit is eliminated entirely without knowing exactly how that will affect the overall level of venture capital or the level of savings. That is an easy decision to make, it seems to me. Any economic analysts you like would have made the sensible decision. The government made the opposite decision and abolished the tax credit.

The answer has been exactly the same from the outset. The government has no evidence that it does not work. It has not even done an impact study. It relies on one study only out of all the others that have been done and on a second study that was done peripherally by the OECD. It rejects all the studies on the extremely complex, extremely rich role that the Quebec funds play.

[A voice]

That is true.

[The Chair, Conservative, James Rajotte]

Merci.

Do you have anything further on this, Mr. Saxton?

[Andrew Saxton, Conservative, North Vancouver, BC]

Thanks, Chair.

I just want to remind Mr. Caron that our government has introduced an extremely popular savings vehicle known as the tax-free savings account. I believe there are something like six million or seven million of these accounts which have been opened. They encourage Canadians to save for the future.

[The Chair, Conservative, James Rajotte]

I'm not sure either side is convincing the other, but I will go back to Monsieur Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Perhaps you are right there, Mr. Chair.

In reply to Mr. Saxton, yes, the government has established the TFSAs, but that is not related in any way to venture capital. They are personal savings. But we have something that can serve both functions at once.

The first function was to help people to save. The second was to allow those savings to directly strengthen venture capital and development capital that provides specific help to regions that we want to develop economically, regions that are not always urban.

There are a number of ways to save. The RRSP, which has been around for a long time, is a way to save. With these funds, we had savings directly targeted to a current weakness in Canada, the level of venture capital. Among OECD countries, Canada is bringing up the rear in terms of venture capital.

I hope that the action plan will be a success. But it would have stood a better chance with the investments from the labour-sponsored funds. Unfortunately, the government rejected the offer.

[The Chair, Conservative, James Rajotte]

Merci.

(Clause 81 agreed to)

Can I group any more clauses, colleagues? How will we proceed?

Mr. Brison is saying up to clause 99. Ms. Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Well, we'll stop there then. For us, it's up to 112.

(Clauses 82 to 99 inclusive agreed to)

[The Chair, Conservative, James Rajotte]

Mr. Brison, do you want to vote on clause 99?

[Scott Brison, Liberal, Kings—Hants, NS]

No, I'm fine with clause 99.

[The Chair, Conservative, James Rajotte]

I'm sorry, that's clause 100.