Finance Committee on Oct. 17th, 2016

[The Chair, Liberal, Wayne Easter]

I call the meeting to order. As most witnesses know, this is the Standing Committee on Finance. Pursuant to Standing Order 83.1, we are holding pre-budget consultations in advance of the 2017 budget.

When we're on the road we usually ask members to introduce themselves so witnesses know who they're talking to and where they come from. I might mention as well that Mr. Albas had a funeral yesterday. I think he took the red-eye flight, but he will be late getting here. He may not get here until after the first panel.

My name is Wayne Easter. I am a member of Parliament from the riding of Malpeque in the neighbouring province.

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

Good morning, everyone. My name is Francesco Sorbara, and I represent the riding of Vaughan—Woodbridge, which is basically attached to the beautiful city of Toronto. We're known as “the city above Toronto”.

[Steven MacKinnon, Liberal, Gatineau, QC]

I'm Steve MacKinnon, a transplanted New Brunswicker who is now the Liberal MP for Gatineau, Quebec.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

I am Ziad Aboultaif, the member of Parliament from Edmonton Manning, the northeast side of Edmonton.

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

Good morning. I am Pierre-Luc Dusseault, the member of Parliament for Sherbrooke, Quebec, in the Eastern Townships.

[Raj Grewal, Liberal, Brampton East, ON]

Good morning. My name is Raj Grewal. I am the member of Parliament for Brampton East, just outside of Toronto.

[The Chair, Liberal, Wayne Easter]

Thanks to all of you.

I might mention as well—because sometimes it's distracting—that you'll see people looking at their iPads now and again. Now that we're a paperless society, what's usually going on is that we're trying to find the briefs on these iPads. We're not playing games on the iPads. We're just trying to find the information.

Thank you for coming.

Starting with the Dairy Farmers of New Brunswick, we'll hear from Mr. Gaunce.

[Paul Gaunce, Chairman, Dairy Farmers of New Brunswick]

Thank you to the committee for inviting us to speak today. You have a copy of my presentation, and I'm going to go through it quite quickly, because I'm sure you've been talked to by Dairy Farmers of Canada before. I represent the Dairy Farmers of New Brunswick. I'm the chairman. I also have a small dairy farm. My son and daughter work with me.

We have about 200 dairy farmers in New Brunswick. In New Brunswick dairy runs neck and neck with potatoes for the largest revenue producer in the province. We're one of seven provinces in the country in which dairy has the largest revenues among agricultural producers. We're showing phenomenal growth in Canada in the dairy industry now. That's amazing because people think of us as supply-management systems that are closed with no growth, but the growth in the domestic market has been huge in the last few years. There has been a big change in the mindset of doctors and the heart foundation who no longer think that butter will kill you, and butter growth has just been crazy.

I don't have to tell you I'm a converted person, but butter makes everything taste better. Now, that growth is great but it also brings with it some issues. One is the fact that our processing plants are getting close to capacity; they're getting old. We need a lot of infrastructure upgrades, and the technology around the world is also changing. We have an issue with diafiltered milk being imported. It's imported because the cheese processors find it an easier product in their cheese, and I don't blame them, but we need to get that technology into the new plants and allow for more capacity in this country. There was a promise of processing money for infrastructure upgrades in the CETA and TPP deals. That's been discussed with the new government, but there's been no decision yet. The CETA and TPP deals are going to take approximately 6% of our market away. That's money we're going to lose forever, and that's certainly going to create a hard time for us. There was a $4.3 billion income compensation package available that hasn't been discussed or agreed to yet either.

Now, we know there are issues with CETA and TPP. When they'll be ratified and put into place, we have no idea, but they've all been signed. They're going to be put in place sooner or later. We hope that compensation package comes through, because we can use it on the farms to be more innovative and to upgrade our technology to help become more efficient and hopefully to create more growth and more jobs.

I'm just saying this off the cuff now. As a small-business person and someone who is probably at the tail end of the baby boomers, I'd like to address your other questions about how we could help the whole society do a better job for the country. I'm a firm believer that if people are allowed to make a decent living, they'll spend money and help create growth in any part of the country. So what's the cost of living? I have no idea; it's different from province to province, but let's say it's $25,000 a year. Why would you tax anybody who makes $25,000 a year? So make your basic personal exemption $25,000. The person with an income of $25,000 is going to spend all that money just to live, which in turn creates growth in dollar rollover.

The other thing is that all of us baby boomers are getting to an age at which we are going to require more health care. Why not increase the capital gains tax exemption so all of us baby boomers can save enough money to look after ourselves? At our age we're going to need a lot of health care, but if we have that disposable income, we're not going to be a burden on society or the rest of the taxpayers since we'll be able to cover our own costs. If we get that magic number for the clawback on Canada Pension and old age security, then that's great; that's money we get back and we can spend on the rest of society.

These are just a couple of thoughts from my brain.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

We will now turn to the Fredericton Chamber of Commerce.

Ms. Ross, welcome. The floor is yours.

[Krista Ross, Chief Executive Officer, Fredericton Chamber of Commerce]

Good morning, and thanks so much for including the Fredericton Chamber of Commerce in this process.

I would like to welcome all of you here. I know that probably many of you have visited Fredericton before and that Mr. MacKinnon lived here many years ago. Thanks for visiting our community. I hope you enjoy your stay.

Our chamber of commerce has 950 members. We're the largest chamber of commerce in New Brunswick and are second only to Halifax in the Atlantic provinces. We are very representative of our business community. Our mission statement is “community prosperity through business”. I wanted to give you a bit of background about who we are.

I want to address question two, which is about federal actions that would help Canada's businesses. I draw your attention to the Canadian Chamber of Commerce's “Top 10 Barriers to Competitiveness” report, which they released earlier this year. That helped me form our response to this.

First of all, there are the corporate tax rates. Companies are penalized when incomes reach $500,000; they jump from the 11% small business rate to the 15% corporate rate. In the provincial tax rates, the jump is from 15% to 27%. It's a very large jump at that threshold. This is one area that we are concerned about.

Second, a huge and time-consuming hindrance for business is the cost and complexity of complying with Canadian tax law. It's a necessary hindrance, I guess, but it is a hindrance to business. For small and medium-sized enterprises, dealing with the CRA can be a complicated process. Between the GST, the HST, payroll tax, income tax, and CPP, many businesses are required to make 30 or more remittances each year. There are provincial ones as well, but many are federal. Businesses tell us that if they make a small error in their remittances, in fact, they're faced with unforgiving penalties of the same proportion as those for large businesses and with an appeal process that is complicated and costly.

Third, on the certain tax breaks that only help SMEs, the federal SR and ED program, scientific research and experimental development, offers a 35% credit for the first $3 million in expenditures for small firms, but only a 15% credit for expenditures exceeding $3 million. In a time when we're trying to push and enhance innovation, research, and growth in that area, we think this could be adjusted to reflect that.

As Mr. Gaunce has mentioned, Canada's tax system treats the transfer of family-owned businesses in farming and fishing favourably, but that is not always so in other sectors, where family members face the capital gains tax. This can discourage the transfer of family-owned businesses to the next generation, whereby they can remain profitable and continue to provide employment, as well as paying taxes, of course. We feel that should be looked at in terms of the inheritance taxes and capital gains taxes relating to the transfer of businesses.

The fifth item I want to mention is the small business deduction. The taxable capital threshold has remained at $10 million, which we feel disadvantages our larger members as well. Also, we did make a submission to the committee requesting that New Brunswick's Small Business Investor Tax Credit Act be added to the list of acts under which a corporation may be registered to qualify as a prescribed venture capital corporation. We need more private investment here in New Brunswick. Likely that's true across the country, but here in New Brunswick we are finding that specifically. We want to encourage private money in the economy. I did bring a copy of our submission that was done on August 5, 2016, if you would like to have that for your records as well.

The other question I want to address is question three in regard to “[w]hat...measures would ensure that urban, rural and remote communities enable residents to make their desired contribution to the country's economic growth and”—more specifically for us—“businesses to expand, prosper and serve...?”

Our response is that trade-enabling regulations and legislation, agreements, and infrastructure are what we need. We are a trade-dependent country, and this province most specifically is trade dependent. Increasing our exports should be a top economic development priority. We feel that the federal government plays a very important role in this regard, of course, in investing in appropriate trade-enabling infrastructure, both digital and physical. Natural resource development, we feel, is being hindered by Canada's inability to get products to market.

Another of the Canadian Chamber of Commerce's top 10 barriers to competitiveness isn't just a rural issue: roads and bridges, pipelines, railways, airports, and seaports. Having the right infrastructure in the right place at the right time can make all the difference in a global economy. We need the government to allow business to compete. One of the best ways to do that is to support projects that help us do that.

Specifically, I would like to share an example with you that's been a thorn in our side for several years. We are very strongly supportive of an expansion of the Fredericton International Airport. Our airport is one of 26 airports that form the national airport system.

These airports have been identified as being strategically important to the country's air travel system; however, NAS airports are excluded from ACAP funding. It was specifically established to assist airports with fewer than 525,000 passengers annually, so they were considered to be not self-sustaining.

Fredericton is one of six NAS airports that are small enough to otherwise need and receive ACAP funding, but because of this policy they're ineligible. Our airport is operating at 75% over capacity right now, and I'm sure you may have experienced that when you arrived here yesterday. You will most certainly experience it when you leave here, because the lineups to get through our security and even the holding areas for the gates are absolutely unacceptable. If you have baggage to drop off, you might want to consider pre-boarding tickets before you go to the airport. It's a considerable challenge being 75% over capacity.

Our airport was designed for 200,000 passengers and we're now serving 350,000. By 2030 we know that the numbers will be up to about 500,000. We understand that the only factor that's holding the expansion back is the exclusion from this funding.

Representatives at all three levels of government support the project, and the airport itself already has its one-third of funding in place. It has been frustrating that there has been so much talk of infrastructure renewal at the federal level, but we haven't been able to find a solution to this problem.

This is exactly the type of infrastructure project that the government should be focused on. It will have a long-term positive impact on economic development, and it will pay back the government's contribution through increased taxes in just six years.

That is all I have to say at this time, but I would welcome questions if there are any.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Krista.

We have all of the briefs that came in in August.

Mr. Mike Legere is with Forest NB.

[Mike Legere, Executive Director, Forest NB]

Thank you, Mr. Chair.

Good morning, committee members.

Forest New Brunswick is an industry association representing the majority of forest product manufacturers in the province of New Brunswick. Our mission is to be the voice of forests and forestry.

The significance of the forestry sector in New Brunswick is often understated, but it's very obvious. We contribute the most to the provincial GDP, at 5%, which represents about $1.5 billion in economic activity directly, and roughly $2 billion if you include indirect contributions. We have revenues of $3 billion in export and domestic sales.

The association identified several issues that are constraining the sector's global competitiveness. As for our relevance nationally, if we look at our forest industry throughout the country, with 600,000 people directly and indirectly employed, we can see that it is of course extremely significant. We contribute roughly $20 billion to the economy, so it's significant on regional, provincial, and national levels.

What we're looking to bring forward to the committee today is recommendations around three agencies and areas of financial engagement with our sector.

One is that we're looking for continued funding and also an enhanced and more strategic consideration of how and where this funding is spent with regard to the Atlantic Canada Opportunities Agency and, in particular, the Atlantic innovation fund.

The second is Climate Change Canada, with their low carbon economy trust fund. I'll expand a bit on how this is applicable to our situation here in New Brunswick and nationally.

The third is phase two of the Infrastructure Canada program.

Looking first at the ACOA AIF, in New Brunswick we have a pending spruce budworm epidemic that's knocking at our doorstep. We have outbreaks that occur in roughly 25-year cycles. We're at the start of a new cycle here. The last one ended in approximately 1990. That resulted in 50 million hectares of deforestation and impacts across the country.

Currently, across the border in Matapédia, Quebec, we have about seven million hectares being affected by the spruce budworm. To put that into context, New Brunswick has roughly 6.1 million hectares of forest, so the entire deforestation that's happening in Quebec now would completely engulf New Brunswick's forests. It's fairly urgent that we deal with this. The economic loss is significant as well. Over the course of the outbreak, we're looking at $4.7 billion, with a worst-case scenario of $6.7 billion in lost economic activity for the province. You can imagine this on a national scale over 50 million hectares. There would be a considerable negative impact.

It's not all bad news. Out of necessity, I guess, which is the mother of invention, in New Brunswick we've taken on a five-year research project that was generously funded by ACOA through the Atlantic innovation fund. It was a five-year project that started in 2014 with $18 million in funding jointly shared between the federal and provincial governments and the industry. We had academia on board with that. The University of New Brunswick was a primary researcher, and the Canadian Forest Service provided in-kind support on the research as well.

The funding is due to expire in 2017. Because we're in the early stage of a potential outbreak, it's very important for us at this stage that the funding continue and the research proceed. We have three treatments that we're testing now, with very positive results early on. Within weeks, we're expecting to have a new proposal submitted to ACOA for funding. Also, we're making presentations to your colleagues in government.

Second is silviculture investment. This pertains to the low carbon economy trust fund. We feel that this is an excellent way to deal with your climate change obligations. In New Brunswick, we're looking at more intensive silviculture on crown and private lands. We believe that we have the ability to capture two million tonnes of CO2 annually, and this will contribute to our national obligations under the Paris accord. The economic impact here, especially in rural communities, is significant. These are immediate jobs, with boots on the ground. Roughly 95¢ of every dollar spent on silviculture goes into wages. It's labour intensive. We are looking for federal investment through the climate change agenda to deal with this.

Third, to reiterate comments that were made by the preceding presenters here on infrastructure, we think that infrastructure investment, especially as we look to the phase two engagement through Infrastructure Canada, has to be more strategic. From the forestry perspective, a large portion of our costs comes from the transportation of wood from forest to mill. In New Brunswick, 40% of our harvested timber has to travel on roads that are only rated to 43,500 kilograms, and that increases our transportation costs considerably.

After wood fibre costs, transportation is the biggest cost that we have. It makes us uncompetitive compared to other jurisdictions. In fact, it is 42% higher compared to the weighted average of other eastern forestry-dependent provinces.

The potential here a reduction of 54,000 loads if we can get those rates increased, but it requires investment in bridges and culverts. These are not the bridges and culverts that we see on our primary roads. They tend to be on secondary roads. Now why is this significant? This is a problem faced by many jurisdictions, but in New Brunswick it's been quite pronounced, because there's been a lack of resources to put into improving this infrastructure. I guess I can liken it to this: You are in this hotel. The elevators that you go up and down in to get to the meeting are very nice, but if it weren't for the service elevators in the back, a lot of the nice services, such as the nice rooms with the linens, wouldn't happen. That infrastructure is like the service elevator: it has to be there; it's very important.

That concludes my comments.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mike.

We now turn to Mr. Brun of the Maritime Fishermen's Union.

[Christian Brun, Director General, Maritime Fishermen's Union]

Good morning, ladies and gentlemen.

I'd like to begin by thanking the members of the committee and extending my greetings to them, especially Mr. Easter, from the Atlantic region, and Mr. MacKinnon, whom I have not seen for some time.

My comments will be in reply to question 3, essentially. I will begin by explaining the nature of the UPM, the Union des pêcheurs maritimes.

The union is made up of around 1,300 New Brunswick fishers. They are captains and owner-operators of enterprises in New Brunswick and Nova Scotia.

We are also part of the most important fishery sector in the Atlantic region, the independent group. In other words, these are independent fishers who operate and manage vessels.

Our organization brings together approximately 10,000 fishers like that who hold permits and are present in hundreds of communities in the Atlantic region. In addition, we account for 75% of the value of Atlantic fishery landings, which are worth over $2 billion a year.

Independent fishers fish lobster, crab, shrimp, ground fish, scallops, herring, capelin, etc. They are all, as I said, owner-operators, business managers, and their businesses are mostly family-owned. The important thing is that they live, hire, spend and reside in hundreds of fishing communities from Gaspé to Labrador.

These communities depend on access to the adjacent marine resources for their socio-economic well-being. Hence the dynamic in these communities essentially rests on the occupation of the Atlantic territory. If that were not possible, many Atlantic communities would not exist, or very little would be happening there, as I am sure you understand.

In addition, our industry also exports. More than 80% of our landings are exported offshore.

Our sector is also one of the only ones in the Atlantic region that is experiencing considerable growth. There have been impressive increases, year after year, in the volume and value of the landings. In any other sector, we would really be the flagship of the economy, and yet we often get the feeling that we go unnoticed. Often, the Government of Canada does not seem to value or even be conscious of the contribution we make to the economy and rural well-being of our region. This is especially manifest in the lack of political attention for our fleets, which are very precious to us and have done incredible work in the last generation by maintaining these benefits in our communities in order to keep them alive.

If there are independent fishers in Quebec and the Atlantic region today, it is thanks to federal government policies like the owner-operator and fleet separation policies that were put in place by the Honourable Romeo Leblanc some 40 years ago. Those policies gradually took fishermen out of poverty and dependence and brought them comfortably into the middle class. By allowing them to become independent of the fish processors and buyers, these policies created a balance between the harvest, fishers, and other sectors that often have a lot of capital and a strong say about the delivery of the product to market.

The Government of Canada understands the repercussions wide income disparity can have on society. We have experienced such situations. The wider the income disparities in a society, the greater the social problems, the weaker the economic growth, the lower the educational level, and the higher the crime and incarceration rate. I am explaining this because we need balance and a strong middle class. Moreover, we have to invest in these industries if these benefits are to stay in our communities. That is very important.

Despite the success of policies that protect the independence of fishers and the economy of coastal areas, the policies have been neglected by Fisheries and Oceans Canada and by the Government of Canada over the past 20 years.

Little by little, those who should not have access to fishing licences have deviously taken control of our coastal fisheries; they are encroaching on them, and it is urgent. We are headed for a system like the one in British Columbia where a fishing licence has become a privilege for the well-off, who simply collect fees from the fishers. In other words, fishers have become employees. Little by little, despite the protests of our fleets, we are headed toward the same situation in the Atlantic region, and we are very alarmed by this.

If not dealt with effectively and quickly, the situation will result in a massive shift in the distribution of wealth away from fishermen and coastal fisheries towards corporations and urban areas; create an intergenerational crisis in terms of employment opportunities in fishing communities; permanently reverse the social and economic achievements of past Government of Canada policies in the fisheries and undermine the economies of isolated rural areas of the coast; and, finally, create the perfect storm for a foreign takeover of our industry. We're already seeing some aspects of that taking place.

The Government of Canada has to act; it has to act fast, in our opinion, with consistency and conviction, to preserve the middle class in our fishery. We'd like to see three things. First, we'd like to see amendments to the Fisheries Act and its regulations to protect the independence of fishers by including in the law the major principles that have proven their value over more than a generation, the owner-operator and fleet separation policies. Those policies are there, essentially, to protect the middle class and the equitable and sustainable development of our rural maritime regions.

Second, we want to see a new public policy instrument in the fishery to provide loans and loan guarantees to new entrants to the independent fisheries. It's very important, because our harvesters, on average, are nearing that age of retirement, and we know what can happen. We want to prevent a crisis from happening. We also want this to stay in the families for those who want to do it and to make sure we have a smooth intergenerational transfer. That's coming up in approximately five to seven years. We have to rush this and make sure we have the proper tools to have that generation come in.

Third, we want to see federal funding for collaborative research on lobster sustainability, in the context of climate change, among our independent fleets, Canadian universities, and the Department of Fisheries scientists, under the national centres of excellence program. Lobster is Canada's most important fishery by any measure. It sustains rural communities across Atlantic Canada, and yet we invest next to nothing on its research. We would like the Government of Canada to announce funds in the next budget for the creation of an NCE on applied lobster research, which would include a network of Canada research chairs on coastal fisheries in universities in B.C., eastern Quebec, and Atlantic Canada.

I'd be open for questions if there are any.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Brun.

Mr. Fudge, with Opportunities New Brunswick, welcome. The floor is yours.

[Paul Fudge, Chief Financial Officer, Vice President, Finance, Opportunities NB]

Thank you, Chair and committee members.

I am Paul Fudge, representing Opportunities New Brunswick. We are the provincial crown corporation responsible for trade and export, investment attraction, and business development within the province.

Specifically this morning, I've been asked to speak on access to capital as it affects New Brunswick, Atlantic Canada, and rural areas. First I'll talk about two reports just four years apart that have some commonalities, and similar reports in the past that have not changed to today.

In 2012 the board of the FutureNB initiative, led by Francis McGuire, released its access to capital report. Four key observations from the report were as follows.

First, New Brunswick entrepreneurs prefer debt to equity. They prefer to retain full ownership of a company, but is debt the best option for early-stage companies?

Second, capital is available for good projects and companies, and seemingly more so for companies early in their life cycle. Statistics show that in New Brunswick, about 200 companies per annum are helped by assistance from different government agencies. However, having traversed the valley of debt, start-ups must still jump over the major hurdles of commercialization and growth to get that next $1 million once they have a proven product.

Third, rural firms face additional challenges no matter what the industry or type of product. To raise capital, they have three issues. They are remote from most financial centres and large banks or areas where decisions are made. The general types of business usually started in rural areas are quite different from those in urban areas and are harder to finance in some cases. Access to reliable infrastructure for businesses outside major centres is an issue as well.

Finally, the report indicated that entrepreneurs had an issue with providers, including investors and creditors, being financially understanding regarding key items when discussing capital issues. Investors would rather back a great management team with a good idea than a good management team with a great idea. How do you raise the quality of financial understanding in entrepreneurs, not only in New Brunswick but across Canada?

In January of this year, an access to capital opportunities summit was held in Fredericton, right here in New Brunswick. Four of the main items that came out of that conference were as follows.

First, again there was the issue of financial literacy. Business owners must better understand accounting, finance, cash flow, business plans, and accountability to shareholders and lenders in order to better understand and present their cases.

Second, the appetite for equity is low. Entrepreneurs usually lack personal funds to finance a start-up. They tend to prefer debt when equity is the correct financing tool, but they still want to retain control of their company.

Third, there is the financing of soft assets. New Brunswick in the past few years has seen dramatic growth in information technology start-ups. However, financial institutions find it very difficult to finance soft assets and intangibles. How do we step in and fill the gap?

Finally, as mentioned earlier, there is the matter of succession. The transfer of family businesses to the next generation can usually be achieved with internal family financing techniques. However with the baby boomer generation about to retire over the new few years, who will finance their equity portion as you move forward and how will that be taxed?

How do we increase access to capital for entrepreneurs in rural Canada, Atlantic Canada, and specifically New Brunswick? We would like to put forward the following five ideas for the committee.

First is a coordinated effort. All levels of government—federal, provincial, and municipal—need to work together with all types of capital providers to ensure coverage of all types of businesses in all areas. Joint funding programs or matching fund initiatives could be implemented to encourage lenders and investors to extend capital to businesses.

Second is financial literacy. Entrepreneurs need training, guidance, and mentorship regarding financial institutions. Understanding how to pitch a project to capital providers in the language of the capital provider is just as important as the project itself. How many great ideas and great entrepreneurs never had a chance because they were frightened by the financial side of their business, just as a lot of people are afraid to do their own taxes?

Third is owners' equity. How do we assist start-ups or succession planning with their portion of the equity infusion for business? As noted, entrepreneurs tend to prefer debt when equity is the correct choice for early stages of the business life cycle. Entrepreneurs tend to prefer debt because they do not want to sell any portion of their business and would like to retain control. Finally, most of them prefer debt, because they understand aspects of debt more so than equity. Most of them have bought a car or have a mortgage, and they understand the debt cycle.

Fourth, I want to turn to urban versus rural. Great ideas and projects come from all corners of Canada. Access to most elements of running a business are generally more accessible in urban areas. How do we bring the elements of running a business, like marketing, mentorship, training, and access to capital, to rural Canadians?

Fifth, let's look at limited private capital in Atlantic Canada. In larger urban areas, the concentration of businesses, government programs, and wealth is more prevalent. In Atlantic Canada, there is not the same distribution of successful entrepreneurs who become angel investors or small-capital providers. There is not the concentration of medium and large venture capital firms with staff searching for deal flow. Banks have regulators and shareholders to answer to in their investment portfolios. Government needs to fill the gap where angel investors, venture capital, and financial institutions cannot go, either directly or with programs to incent other capital providers to join in with the funds provided by government.

There is no easy answer, no one-size-fits-all approach. Unfortunately, for a lot of entrepreneurs, their ability to raise appropriate and sufficient capital is limited by their proximity to capital providers and their financial literacy. We believe a coordinated effort by all levels of government should help businesses, and this would increase the wealth of Canadians.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Fudge.

I will turn to Mr. Walker, with the Agricultural Alliance of New Brunswick.

Welcome, Eric.

[Eric Walker, Director, Agricultural Alliance of New Brunswick]

Thank you.

I'm with the Agricultural Alliance. As well, I sit on the Canadian Federation of Agriculture as a representative.

I was asked to come here today to focus on taxation regarding intergenerational farm transfers. Sons and daughters are at a disadvantage when purchasing a family farm, in comparison with a neighbour or a stranger.

I'll use an example. If I were to purchase Paul Gaunce's dairy farm for approximately $2 million, I would be at a tax advantage of approximately $680,000 in comparison with Paul's son. The way the tax law is currently interpreted, if you're one of fewer than six individuals in an arm's-length transaction, then you are required to borrow the money personally.

I was asked to come here today to suggest that the committee take into consideration changing this tax law.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Walker, and thank you all for your presentations.

We'll turn to the first round of questions and to Mr. MacKinnon.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you, Mr. Chair.

It is a great pleasure to be in Fredericton again. I spent many good years in this city.

Thank you all, by the way, for these very interesting presentations, some of which are very familiar to me in my role as a Quebec member of Parliament. In fact, it was just on Friday that I visited the local BDC office in Gatineau, where the very theme you spoke about, Monsieur Brun, intergenerational transfers, was brought up. I know that is a huge issue and one that I think we will have to consider as we move toward a report.

Overlaying that is the theme of venture capital. Mr. Fudge and Ms. Ross, you spoke about access to capital in New Brunswick, and we're hearing that as a common refrain across the country. Ms. Ross and Mr. Fudge, are you seeing pent-up demand? Are there venture capital pools? Are there opportunities to invest? Are there businesses to invest in where the rules are an impediment to getting successful ventures off the ground, either in Fredericton or in New Brunswick generally?

[Krista Ross]

We have an active and vibrant start-up community, as has been mentioned, and a lot is in the IT sector. It is recognized that there is not enough angel investor, not enough venture capital, and there is difficulty accessing loans, particularly for some projects that are intellectual when the person has absolutely no track record in managing a business.

It certainly is something we're seeing. We have a start-up incubator here, called Planet Hatch. We're putting through cohorts on a regular basis and those companies are having.... We think they're world famous. Maybe you've heard of companies like Resson Aerospace that have certainly received some great venture capital and investment. Others have equally great ideas and just can't access the funds.

We also have a business incubator for newcomer businesses and their challenges are even greater because they have other barriers to overcome as well.

[The Chair, Liberal, Wayne Easter]

Mr. Fudge.

[Paul Fudge]

There are opportunities for more investment for certain types of businesses, as Ms. Ross has indicated. There are educational programs for entrepreneurs in the major cities in New Brunswick.

We find that some of the programs that are available from the federal or provincial side don't do enough and are not funded enough to help those entrepreneurs with the good ideas. I'm not saying that we need to finance everything that comes out of all the incubators in Canada, but there are a lot of good ideas.

One of the issues we know specifically is that because of the lack of funds companies tend not to raise enough, so as soon as they raise a certain amount of money—what they think is correct—they're having to start again. Rather than raising $200,000, should they be raising $500,000 so they get time to work on their projects?

That's predominantly what we're seeing in New Brunswick right now, that the runway is too short because the money is not there, so rather than asking for $500,000 and everything saying no, companies are going for $200,000 or $250,000 and not raising enough to give them time to build their products.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you.

I would now like to speak about the resource sector in New Brunswick.

Mr. Brun, thank you for your eloquent description of the fishing industry. I think that my colleagues could benefit from a better knowledge of the fishing industry and of the agriculture and forestry sectors in New Brunswick, as these are the primary industries that sustain the communities and towns of Atlantic Canada.

I will start with Mr. Brun, but Mr. Legere and Mr. Walker and Mr. Gaunce, you may want to add something.

You went through a number of items in your briefs, but if there were one single thing that a Minister of Finance could do to wave his wand and put in place a measure that would favour growth in your sector, what would that be?

[Christian Brun]

The Minister of Finance would probably not have great influence, despite the influence he may exert on extremely important policies aimed at creating and maintaining growth such as we have experienced. I also think this will be absolutely crucial for the next generation. He may not be the best choice, in the sense that that is probably not his role, but all the influence he could have...

In my opinion, the biggest problem we will face over the next 10 years will involve funding, government or other. It will be crucial to ensure that we have the necessary tools to allow all the young fishers, who are often fishermen's helpers and family members—although that is not always the case—to make their way into the industry.

Without wanting to offend the dairy producers of New Brunswick in any way, I would say that the resource industries are often perceived as cash cows rather than as industries that are made up of business people, or as innovative growth industries. And yet the perception is wrong; my brief experience in this industry, of some 12 or 13 years, has allowed me to understand that our sector offers enormous growth potential, but that we have to be innovative.

From 2000 to 2015 in the fisheries industry in Canada, we managed to increase our exports by 50%. I challenge you to show me one other industry in Canada that has grown like that. Nevertheless, we are still not offered the necessary support, because this field of activity is perceived as a primary industry. It would probably be interesting to ask people in the Canadian financial sector to try to look at these primary industries in a whole new way and to understand that they too can experience considerable growth.