Finance Committee on May 9th, 2017

[The Chair, Liberal, Wayne Easter]

Thank you, all.

Thank you, Ms. McDermott, for your in-depth answers.

We will now turn to part 4, division 6, dealing with financial assistance for students. For that, we have representatives from Employment and Social Development Canada.

Mr. Rahman is the acting director general, Canada student loans program. Mr. Côté is director of policy and research, Canada student loans program. Mr. Moore is director, program design, Canada education savings program, and Ms. Nagy is senior strategic planning adviser, Canada education savings program.

Welcome. I'm not sure who is making the presentation.

Mr. Rahman? Go ahead.

[Atiq Rahman, Acting Director General, Canada Student Loans Program, Department of Employment and Social Development]

Thank you, Chair. Yes, I will.

I'm from the Canada student loans program. I will cover clause 116 that is related to the Canada Student Financial Assistance Act, and then my colleagues from the Canada education savings program will cover clauses 117 and 121. Those are related to the Canada Education Savings Act.

With respect to clause 116, as I said, this is a proposed amendment to the Canada Student Financial Assistance Act that currently limits who can be a qualifying student to Canadian citizens, permanent residents as defined in subsection 2(1) of the Immigration and Refugee Protection Act, and protected persons within the meaning of subsection 95(2) of that same act.

As a result, persons who are registered as Indians under the Indian Act but who are not Canadian citizens are not eligible for student financial assistance under the Canada Student Financial Assistance Act. Amendments to this act will be introduced to provide that persons registered as Indians under the Indian Act will be eligible for student financial assistance, regardless of their citizenship.

That's clause 116. I will now pass to my colleagues from the education savings program.

[The Chair, Liberal, Wayne Easter]

All right. Mr. Moore, the floor is yours.

[David Moore, Director, Program Design, Canada Education Savings Program, Department of Employment and Social Development]

Thank you very much.

I'll start and discuss clauses 117 to 121 of part 4, division 6.

By way of context, I'd like to note the following. Canadians use registered education savings plans, RESPs, to save for a child's post-secondary education. RESPs grow tax-free until they're withdrawn to pay for full-time or part-time education at a community college, university, CEGEP, trade school, or apprenticeship program. The Government of Canada offers two different education savings incentives. The Canada education savings grant is available to all Canadians and is based on contributions. In addition, low- and middle-income Canadians get an additional 10% or 20% based on contributions. For the Canada learning bond, which is available for low-income Canadians, no personal contributions are required.

Under the current legislation, requests for the Canada learning bond and the additional amount of the Canada education savings grant, submitted by anyone other than the primary caregiver—the person principally responsible for the care of the child—are declined. So the Canada Education Savings Act, which governs the administration of these education savings incentives, is being amended to permit the primary caregiver's co-habiting spouse or common law partner to apply for the Canada learning bond and the additional amount of the grant on the child's behalf.

It is anticipated that by allowing the spouse or the common law partner of the primary caregiver to also apply for these education savings incentives on behalf of the beneficiary, fewer education savings incentives requests will be declined, and there will be a resulting increase in the take-up of the Canada learning bond. It should be noted that the eligibility requirements for the Canada learning bond and the additional amount of the Canada education savings grants are not being changed.

[The Chair, Liberal, Wayne Easter]

Thank you both.

We'll start with Mr. Sorbara.

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

With regard to the RESP, the Canada learning bond, and the Canada education savings grant, could you comment on their uptake by Canadian families? I have an RESP for my two daughters. How will any of these changes here expand the participation?

[David Moore]

The take-up rate for the Canada education savings grant is 50.1%, based on 2015 numbers, and for the Canada learning bond, it's 33.1%. By amending the legislation, we anticipate that we could increase the take-up by approximately 54,000 new RESPs, or roughly 9,000 Canada learning bonds and 46,000 additional Canada education savings grants.

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

Thank you.

[The Chair, Liberal, Wayne Easter]

Are there any more questions over here?

It's noted in subclause 121(1) that the provision will come into force on August 1, 2018. Why the delay? If it will improve the ability to gain an education, why not bring it in this year?

[Atiq Rahman]

The way the student loans program works is that it is delivered through our provincial and territorial partners. The student loan applications will have to be modified slightly, and that can't be done until the next fiscal year.

[The Chair, Liberal, Wayne Easter]

Yes. So it's a matter of consultation.

Are there any more questions on this section, members? Is there anything else you want to add?

Mr. Dusseault.

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

I'm trying to understand. You are extending the registered education savings plan so that a common-law partner can also open an account on behalf of the child. If two people apply, would there be two accounts for the same child then?

[David Moore]

For RESPs for the Canada education savings grant, there can be multiple accounts open—by a grandparent, let's say, or an aunt or uncle, or a spouse—but the amount of the grant doesn't multiply. There's only a certain amount for each child. We monitor that through the systems we have. For the Canada learning bond, either the primary caregiver or the common-law partner will have to indicate one RESP that the Canada learning bond can go into.

The rules are a little bit different for both, but we make sure that we do not overpay the amounts of the grant or the bond.

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

Thank you.

[The Chair, Liberal, Wayne Easter]

Are you satisfied? Okay.

Thank you, folks, for your presentations and for answering questions.

We'll now turn to part 4, division 8, which deals with the Investment Canada Act.

From Innovation, Science and Economic Development Canada we have with us Patricia Brady, director general, investment review branch; and Jonathan DeWolfe, director, policy and outreach, investment review branch.

Welcome, Patricia and Jonathan. Who will start?

[Patricia Brady, Director General, Investment Review Branch, Innovation, Science and Economic Development Canada]

I'll start. Thank you.

Good afternoon. We're here to speak to part 4, division 8. It proposes two changes to the Investment Canada Act.

The first change, in clause 192, is to raise the dollar value threshold that triggers the requirement for a net benefit review of a foreign acquisition of control of a Canadian business to $1 billion. Currently an acquisition by a non-Canadian of a Canadian business that's valued at or above $800 million must be reviewed under the Investment Canada Act for its net benefit to Canada and approved by the Minister of Innovation, Science and Economic Development before it's allowed to go ahead.

There is a schedule in the act currently for this threshold to rise to $1 billion on April 24, 2019, roughly two years from now. The amendment in clause 192 would accelerate that increase so that the threshold would move to $1 billion upon the coming into force of the budget implementation act. That would be two years ahead of the already planned schedule.

The higher $1-billion threshold will apply to investments by private sector investors. There is a lower threshold in the act for investments by state-owned enterprises. That threshold right now is $379 million, and this amendment will not change that threshold. In addition, the amendment won't change the government's ability to review investments for national security concerns. Any investment by a non-Canadian now can be reviewed under the act for national security concerns. There's no dollar value threshold for that review, and this amendment will not change that.

The second proposed change to the Investment Canada Act is in clause 193. That's to require annual reporting on the administration of the national security review provisions in the ICA. Currently the Minister of Innovation, Science and Economic Development is required to report annually on the administration of the net benefit review provisions, but the national security review provisions are explicitly exempt from that reporting requirement. This amendment would remove that exemption to require annual reporting on how national security review provisions have been used.

That's an overview of the changes in clauses 192 and 193. We're happy to answer any questions.

[The Chair, Liberal, Wayne Easter]

We'll start with Mr. Dusseault.

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

Thank you, Mr. Chair.

As you know, the monetary threshold in the current version of the Investment Canada Act goes from $600 million to $800 million and then to $1 billion. Now you are proposing to set it immediately at $1 billion. I haven't studied the details, but will you keep the same rate of increase? Will it continue to increase or will the $1 billion threshold remain the same until further notice?

[Patricia Brady]

The threshold will remain at $1 billion for the moment, but a provision in the bill sets out that the trigger threshold be increased based on the—

growth in GDP, annual inflation. There is an increase every year based on inflation, but it's a smaller increase. For example, last year the state-owned enterprise threshold was $375 million. This year, according to the formula for the increase in GDP, it went up to $379 million.

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

For investors in the World Trade Organization, or WTO, countries, the threshold will remain at $1 billion. Will it increase according to inflation?

[Patricia Brady]

Yes, the threshold will increase with inflation, but the increase isn't yet planned.

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

I would also like to know whether any transitional measures have been taken. If, for example, an investor wants to buy a business in Quebec, and it is valued at $600 million or $700 million, could he be advised to wait for the bill to pass, for the threshold to increase to $1 billion? I guess so, if the investor has good lawyers. Is a transitional measure in place for proceedings already under way, negotiations already under way, to acquire a Canadian company?

[Patricia Brady]

Yes, there are transitional measures in the act. Right now the threshold is $800 million.

I heard that it was $600 million, but it's actually $800 million.

For applications that have already been filed, so where there's an application for review filed and it's based on the current enterprise value of the Canadian business that is to be acquired, if the enterprise value is below $1 billion and a decision has not yet been made when these amendments come into force, then the application would be deemed not to have been filed. Essentially, it will require a recalculation of what the enterprise value is at the time these amendments come into force, which for public companies is based on market capitalization. They'll do that recalculation. If at that time the Canadian business is valued at more than $1 billion, then of course it would be subject to review; if it's less than $1 billion, it would not be subject to review.

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

My last question will allow you to respond to criticism of this measure from some people who are concerned about the departure of Canadian headquarters. I have heard more about it in Quebec, being from that province, but I am sure that the same concerns exist elsewhere.

What do you tell Canadians who are worried that head offices will disappear in favour of foreign countries? Given the increase in the threshold from $800 million to $1 billion, they believe that this could accelerate this loss of headquarters.

[Patricia Brady]

We're certainly aware of those concerns. What I would say is that Canada's policy for the last number of years has been to welcome foreign investment because of the benefits in general that it brings in terms of higher-paying jobs, innovation, technology, and management expertise spillover, etc. There have been a number of initiatives over the past many years to increase foreign investment to Canada because of those investments, and this is following on that policy position.