Finance Committee on Oct. 17th, 2016

[Christian Brun]

I must admit that at this time, we are quite satisfied with existing programs. They really do act as a security net in extremely difficult times, for instance like the ones our industry experienced recently. The programs were really useful at that time. We are more concerned with the medium term. Our priorities have more to do with the demographic problems I mentioned earlier and which we are going to have to deal with.

In reality, the Canadian government will be able to reduce its expenditures on those programs. If we can benefit from some very solid policies and help a new generation take over, those jobs will be maintained in a sustainable way and it will be possible to avoid an increase in expenditures in the Atlantic region, as well as employment insurance problems.

The issue is that if we can't manage it, a whole slew of problems will follow, since we employ a lot of people in these rural areas where other types of jobs are quite rare. In a lot of cases, fishery is an integral part of the lives of these people. Leaving the rural areas is the only other possibility. These people often become employment insurance recipients, but not as fishers.

In short, we now have some very important priorities which will ultimately be positive with regard to employment insurance. In any case, the programs are well adapted at this time.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

You mentioned...

[The Chair, Liberal, Wayne Easter]

We're out of time.

Go ahead, Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Good morning, everyone. It's great to be here in New Brunswick.

A number of common themes emerged from everyone's comments this morning: intergenerational issues, demographics, taxation. Some of these issues are fixable within maybe a short period of time, and some of them are structural, and we can look at them. One thing I wanted to zero in on was from Krista from the Fredericton Chamber of Commerce.

With regard to your brief that was submitted, you put a lot of emphasis on the New Brunswick Small Business Investor Tax Credit Act being added to the list of acts under which a corporation may be registered in order to qualify as a prescribed VCC under regulation 6700. Can you talk about the potential of this, if this did come to fruition, and the benefit to New Brunswick of this recommendation?

[Krista Ross]

This would allow more businesses to take advantage of the small business investor tax credit. Mr. Fudge has mentioned that the amounts and the regulations related to the SBITC have increased certainly, but the uptake hasn't been as great as we would hope. If it could be federally included, then I think the participation would be greater, for sure.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Fudge, do you have any comments on that?

[Paul Fudge]

Certainly. We agree that, if there were a federal component matched to our provincial component.... As I mentioned earlier, one of the issues is attracting venture capital from other regions of Canada to New Brunswick. If there were an incentive for investors to come to New Brunswick and take advantage of both the provincial and a federal tax credit, that would certainly enhance the ability to fund projects and companies.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Turning to Mr. Walker, you commented this morning on the tax advantage of an arm's-length transaction occurring, where a son or daughter wanted to purchase the farm versus an outsider, if I can use that term. I was surprised to hear that. I didn't realize that the tax disadvantage, or advantage depending on which side you're on, was that significant. If you had to rank the issues facing farmers, is that a larger issue, or is it more a demographic issue in succession planning, where children or others are just not interested in becoming farmers? I use that term loosely, but is that the larger issue, or is the issue just about getting people to remain within the farming industry?

[Eric Walker]

I would say if you're going to buy a Tim Hortons franchise, you're going to pay. If you're going to buy a farm, you're also going to pay. Most intergenerational transfers happen with a son or a daughter; one will purchase the family farm. But if they have to borrow that money personally and pay the 52% tax.... It was, among the agricultural community members within the alliance, ranked the most important, and then it was unanimously passed, and then it went to the Canadian Federation of Agriculture. There it was unanimously passed as well. It was one of the most important strategic things that needed to change because, like the aging demographics in New Brunswick, we're also faced with the aging demographics of agriculture itself. I would say that, yes, it's a huge deterring factor.

In all fairness, compared to when I purchased the family farm, the transaction isn't a small amount anymore. When the tax laws were set up, family farms used to transfer for $200,000, $300,000, or $400,000. Now you're looking at a $2-million, $3-million, $4-million, $10-million transfer, so the impact has greatly changed.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Christian, did you wanted to add to this?

Also, you made two comments about changes to, one, the Fisheries Act, and then providing loans and loan guarantees in terms of the generational-age issue. Can you provide some more colour on both of those comments?

[Christian Brun]

I just wanted to start by echoing my colleague's situation. I have to show support for what he's saying. This is an issue that's also going to be happening in the fisheries sector. We're seeing a change in our natural resources, at the base. Fishermen were perceived as not very serious businessmen at one point. They were out there to go and harvest their fish. It was a smaller scale of fishing. This has all become something quite different in the last generation. We are going to be seeing the same issue happening exactly that was described.

When we talk about all these demographic challenges, I think one of the most important solutions to this is the family, and keeping the business in the family. If we can facilitate that transfer, that will be the solution to 50% of the problem. It's going to be the same thing in the fisheries sector. The taxation issues my colleague talked about are going to be the same in other sectors, including the fishery.

I mentioned some changes to the Fisheries Act, and it was a request for more description. Basically, for that aspect, we want to reinforce the 40-year-old policy that has been there, that Roméo LeBlanc enacted, and all the following governments, by the way. The Conservative government, and also the NDP as the opposition, at some point supported this policy; but it's only policy. What we're saying is we have to recognize Supreme Court decisions of the past 20 to 30 years, and include these decisions and these really quite clear policies in the act to reinforce the fact that this is an owner-operator type of industry. It is extremely crucial to this industry to be able to face those challenges that are also coming, and also to maintain the benefits in these communities.

We have an example with western Canada where they haven't adopted these types of policies, where you have communities that are no longer populated because the fishery is gone. We'd like to avoid these problems and not have our harvesters becoming employees in the sector.

The final question was on what aspect again, Mr. Sorbara?

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

You had mentioned something about loans.

How much time do I have left?

[The Chair, Liberal, Wayne Easter]

You're out of time, but go ahead.

[Christian Brun]

Oh, the loan guarantees, basically, we have a system, and again it's part of that demographics problem, where we don't have sufficient capital for our young harvesters who are in the boat. They don't have any options to really take on the investment that is necessary today. The older fellows in the industry bought their lobster licences for 25¢, believe it or not, in the sixties, or fifties, or forties. Now if you want to purchase a licence, you're talking about close to the half-a-million-dollar mark.

These young harvesters don't necessarily have a huge financial background, but they're learning the ropes and are especially good at what they do. They need to have that capital to be able to come into the industry, to make sure we have that transfer.

[The Chair, Liberal, Wayne Easter]

Paul, did you want in quickly on this one?

[Paul Gaunce]

Yes, thank you.

I think it's well known that we are coming to a crux of intergenerational transfer. It's not only dairy farming. Every small business is a way of life. You put in the hours. You never get paid for them, but you do it because you love that job. God bless you, if you can go to work every day and love it, because that makes your life a lot easier. The ones who have the most chance to succeed are going to be the families who were brought up working in that job. They understand it, and they are the ones who are willing to move it forward and make it grow. We have to facilitate that somehow. Every facet of industry in this province is coming to that stage where they have about as much hair as I do.

[The Chair, Liberal, Wayne Easter]

And me....

Ziad has more hair, so we'll give him the next question, as he'll replace Mr. Albas.

Go ahead, Ziad.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Thank you.

I am a small-business owner. I came from the private sector, from international business, so I understand exactly how you feel and what the industry is suffering from. Definitely taxation seems to be on both ends, on the provincial and on the federal.

Now on the provincial end, it's scary to hear that it jumped from 15% to 27%, as you mentioned, Krista. Taxation is an environment that we have to be able to control somehow in order to encourage investment and business continuation. I am 100% on board, too, with generations carrying on the business. I am a big fan of small business. Family business is the core, demographically and socially. It is something that we really need to continue to encourage and continue to have in Canada.

Speaking of taxation on the federal side, especially to put in a recommendation in the new budget, what would you say to the government and to the finance minister on small business tax reduction, as well as on the expansion of CPP and the EI increase? All these are payroll taxes, basically. What would you like to see?

I would like to hear from all of you, if we have enough time. Thanks.

[The Chair, Liberal, Wayne Easter]

Go ahead, Ms. Ross.

[Krista Ross]

It's not just each individual tax that's an issue; it is the overall tax burden. It's what you are talking about: CPP, on top of EI, on top of—here in New Brunswick—WorkSafe, increased minimum wage, personal taxation, corporate tax, small business tax—

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Carbon tax, too....

[Krista Ross]

Exactly. That's a new one that's coming.

It's just that overall burden. We are not only trying to support the businesses that are here already. How can we encourage other businesses to come and set up in our jurisdictions when this is the case—when it seems as if it is not a level playing field with other places? Just last week, we launched a new program with regard to succession. It is called succession connect. This program is actually supported by federal dollars, as well as provincial and municipal. This is a program where businesses that do not have a transition plan—businesses that do not have a second generation interested in purchasing the business—will be matched with newcomer business people, people who are coming here and looking to set up a business. Often, they have a short window of opportunity to start a business. Many newcomers, particularly our friends who have come here most recently from Syria, have a background in agriculture. There may be some opportunities there as well. This program is to assist them in connecting with a business that is looking to transition so that perhaps they can be mentored and assisted. However, as has been mentioned, if a fishing licence is half a million dollars—I don't know what a dairy farm goes for these days, but I'm thinking it's quite a bit when I hear that robots are milking the cows—it's going to take more than our matching someone with a business they are interested in. It's going to take a fair taxation situation and the ability to access money to buy those businesses.

[The Chair, Liberal, Wayne Easter]

Does anybody else want in on that question?

Mr. Legere, go ahead.

[Mike Legere]

I think my colleague Ms. Ross has hit the nail on the head: it's the aggregate effect of increasing taxation. When we look through a forestry lens, we are at $1.5 billion in economic activity. We were once at $4.2 billion, in 2004. We think we can get back up to the $4-billion mark, but I already have companies that are starting to hedge on making investment because of the uncertainty with taxation. Our sector, in particular, is faced not only with those taxes, but with pending trade issues on softwood lumber, supercalendered paper, and dissolving pulp with China. You add that potential burden on top, and investment is just going to look elsewhere. That situation is untenable for our industry. To add anything more to the burden and the uncertainty would certainly not be conducive to investment.

[The Chair, Liberal, Wayne Easter]

Thank you. We're out of time, Ziad.

I have one question before I go to Raj.

Ms. Ross, Mr. Legere, and Mr. Fudge, you mentioned access to capital. We met with ACOA, the regional development agency for here, and one of the shocking things in terms of their presentation from my perspective was when we asked them if they needed more money for programming. The answer we got from one of them—not in New Brunswick, they didn't answer that question—was no. What new policy initiatives should be fostered by the regional development agencies? And we didn't get any answers to that question either. That kind of shocked me. Where are you folks in that area? Because in all honesty, if ACOA's not pulling up its socks and doing what it should, then they should be told that. And if they need new programming, we should be recommending it.

Do you have any thoughts in that area, Mr. Brun?