Evidence of meeting #33 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was information.
A video is available from Parliament.
Executive Director, Canadians for Tax Fairness
There are further legislative changes that I think are warranted, particularly improving the GAAR.
NDP
Murray Rankin NDP Victoria, BC
That was the last thing I wanted you to talk about. You talked about the GAAR. You only have one minute. Could you explain what GAAR is and what your proposal is regarding economic substance?
Executive Director, Canadians for Tax Fairness
GAAR is the general anti-avoidance rule and it relates to corporate profit shifting and other tax-evasion schemes. Government's ability to go after corporate profit shifting and aggressive tax-avoidance schemes would be significantly strengthened if the Income Tax Act were amended to require the courts to consider economic substance in determining whether there is an avoidance transaction or whether an avoidance transaction results in misuse or abuse.
Just a tightening up of that regulation would make a big difference in the government's ability to get convictions in tax court against corporations who are profit shifting and tax evading.
Conservative
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
Thank you very much, Mr. Chair. Thank you to our witnesses for being here.
With respect to the tobacco taxes, I'd like to start with Ms. Fralick and Mr. Cunningham. New Brunswick is $44.52. What I'd like to understand is what is the key to the west, which has higher taxes? You indicated that they've had more success. What has been their key for decreasing contraband? What do you think are the major things they've done as opposed to the lower-tax jurisdictions, if you will?
Director, Public Issues and Senior Policy Analyst, Canadian Cancer Society
In western Canada, there are no legal factories and no smoke shacks selling untaxed products to non-natives. The governments there just never allowed them to start; whereas in Ontario and Quebec, there is a longer tradition of them occurring so it's harder to then deal with it. But in the west, they never started.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
Okay.
What is the health care cost of the introduction of one young smoker to smoking?
Director, Public Issues and Senior Policy Analyst, Canadian Cancer Society
What we can say is that it's $4.4 billion a year in direct health care costs because of smoking. We have to do some calculations to get a very specific answer. But it is enormous.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
That's $4.4 billion a year just in health care costs to the Canadian economy.
Director, Public Issues and Senior Policy Analyst, Canadian Cancer Society
That's just in health care costs. If you include other costs, from fires and lost productivity, the number is much higher.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
Thank you very much.
Mr. Hayes, I'd like to talk to you a little bit about venture capital. You indicated that the venture capital funds have been in place since Mulroney.
Can you talk to me about the trends? Can you comment on the number of deals that have actually been closed over the past couple of decades using these funds? Is that trending up? Is it trending down? Just exactly what has been happening with these deals, up until last year?
President and Chief Executive Officer, GrowthWorks Atlantic Ltd.
I can speak to the various funds that our organization runs. We've probably closed in excess of 1,000 deals since the funds that we manage were created.
President and Chief Executive Officer, GrowthWorks Atlantic Ltd.
We created our first fund—this is just our organization—in 1992 in British Columbia.
President and Chief Executive Officer, GrowthWorks Atlantic Ltd.
Then we acquired the management of one of the original funds, the working ventures fund, which was in Saskatchewan, Ontario, and out east. They would have done in excess of 1,000 deals as well.
Then we created a fund in 2005 in Atlantic Canada. It's a small fund. We've done 20-odd deals.
In the province of Quebec—my gosh—I couldn't estimate. Thousands of companies would have received support through those funds. Those are quite large. The Solidarity fund in itself is around $10 million, so you can imagine the scope of their activities.
In their heyday, when these funds were first created, I think folks were focused on the tax credit, which was probably the wrong focus to some extent. Some of these funds weren't managed properly and so on, but they made a significant contribution. When you look at the statistics, over a third of all the venture capital in Canada since 1984 was supplied by the various labour funds that were established across the country and in operation.
That's become less of a factor in more recent years, but the participation by institutions in VC across Canada has dropped significantly as well, so probably, as a percentage, the labour funds were still a pretty important part of the VC ecosystem.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
Using your company as a metric—just because you're more familiar with the numbers—have you seen that trend, those thousands of deals since 1992, go up or down? You said the percentage was steady, but how are you seeing the trend line?
President and Chief Executive Officer, GrowthWorks Atlantic Ltd.
They are significantly reduced, given the challenges in fundraising. This measure has sent a pretty negative message to the investment adviser community. We don't sell directly to clients. We work through the brokerage firms, financial planners, and IIROC firms, which are the bank-owned brokerages. We've seen fundraising go down significantly in the last couple of years.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
Okay. Is it possible to provide a chart to the committee with respect to the number of deals? That would be very helpful to see.
President and Chief Executive Officer, GrowthWorks Atlantic Ltd.
We have that information. I don't have it with me, but we certainly can.
Conservative
President and Chief Executive Officer, GrowthWorks Atlantic Ltd.
There was some very good work done by an economist based in Montreal, Gilles Duruflé, who is probably the most knowledgeable independent individual in the country. He has examined the impact that these funds have made across the country. That submission was made back, I think, in July 2013 and it has all of that information. I'll make sure the committee gets that information. He is very well regarded in the industry, not just in Canada but internationally. I think that work will stand the test of anyone's assessment.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
Okay. I just want to ask you a couple of questions about ACOA. From the ACOA perspective, does most of that funding come through the business development program loan area for the businesses that you're talking about?
President and Chief Executive Officer, GrowthWorks Atlantic Ltd.
It does, but in more recent years they have purposely attempted to put more focus on the early-stage side of things, where it is really needed. We think they are doing great work in the provincial offices and are really trying to help address the need at that level.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
This will be my last question, Mr. Chair.
It's one thing to have this kind of thing, but I see now that a lot of the provinces are coming on. New Brunswick has a pretty generous small-business investor tax credit. How do you see those types of things as providing good possibilities for people to raise capital? I know New Brunswick is actually looking at theirs now and will potentially enhance it.
