Good morning, Mr. Chair, and committee members. My name is Sean Wallace. I'm the economic development director for the town of Tisdale, a small agricultural community located in the northeast region of the province. I'm here representing the Saskatchewan Economic Development Association, SEDA. My comments this morning pertain to productivity and competitiveness in rural economies.
SEDA's membership includes a large cohort of economic developers, with a majority serving in small rural communities with populations under 10,000. Many of these communities are reliant on agriculture and resource development. The majority of businesses located in these communities service these sectors.
Rural Saskatchewan has many of the same core issues as does any small community in rural Canada when it comes to productivity and competitiveness. The ability to attract investment, mitigation of population decline and shifts, access to health care and education, aging and inadequate infrastructure, lack of transportation options, and opportunities for youth are usual themes. Rural communities also tend to have higher rates of poverty, unemployment, and underemployment. Of course, there are exceptions, and these exceptions are the communities that have taken advantage of their unique economies.
Unfortunately, when developing strategies and policies around productiveness and competitiveness, a single national strategy would be largely ineffective because they tend to be generic and focus on large population centres. What works in cities doesn't necessarily work in rural communities. Rural Canada can be complex when it comes to local economies, labour market participation, access to services, transportation, etc., and we require different strategies to address these complexities.
In terms of what would make Canadians more productive in rural Canada and the measures the federal government can take, I believe developing a modern strategy on rural economic development with the participation of provincial organizations like SEDA and rural economic developers would be a positive first step.
In terms of the federal measures that would make Canadian businesses more productive and competitive from a rural perspective, funding for innovation, encouraging careers in agriculture through education and training, and preserving tax incentives for farm operations and rural businesses to support the agriculture industry will help grow and maintain rural economies.
Last, I would be remiss if I did not mention taxes. We know that small business is the backbone of our economy, but in rural Canada, small business is our lifeblood, and a competitive tax regime is critical. Higher taxes mean higher prices for goods and services, which directly impacts our ability to compete.
The government's proposed tax changes would have a disproportionate impact on the agricultural industry. As far as small businesses go, a farmer is much more likely to rely on contributions from all family members. A farm is much more likely to stay within a family for multiple generations relative to other small businesses, and income splitting rules will cause uncertainty as to the tax compliance in these situations, and an increased risk of higher tax costs for family farms.
The proposed tax changes will drastically increase costs of inter vivos and will force families to wait until the parents' passing to transfer farm ownership to the child. They will greatly increase the costs of this transition. In either case, it will decrease the likelihood of a family farm staying within the family.
Also, economic development in rural communities is heavily dependent on private investment, and that is a fact. Rural communities are less likely to attract investment from public companies and foreign investors than urban centres. By removing these incentives from private corporations, and in turn giving the advantage to public companies and foreign investors, it disproportionately impacts rural communities. Much of this private investment comes from business owners in the community with excess incomes who use it to invest in new ventures, often in the form of passive investments that create employment. By taxing these investments at punitive rates, and encouraging the individuals to instead withdraw cash and invest in RRSPs, the ability for this capital to be reinvested in the community will be effectively eliminated. This will have a devastating impact on the economic growth in rural communities. I might say, it might also have a devastating effect on those who practise my profession in rural communities.
Mr. Chair and committee members, thank you for inviting me here today. I appreciate the opportunity to speak.