Thank you very much, Mr. Chair.
Good morning.
My name is Hazel Corcoran, and I am executive director of the Canadian Worker Co‑op Federation.
On behalf of our 64 worker co‑ops across the country and the three Quebec federations that constitute our membership, I am pleased to be with you in this beautiful province, a province with a robust heritage and strong co‑operative culture.
There are over 250 worker co-operatives in various industries in Quebec alone, and a total of 440 worker co-operatives across Canada, ranging from the forestry sector and agriculture to food manufacturing, construction and the service sector. In fact, right here in Quebec City there are many worker co-ops, including, as one example, the Coopérative des techniciens ambulanciers du Québec, CTAQ, which provides paramedic services to Quebec City and Saguenay—Lac-Saint-Jean and has over 500 worker members.
To provide more background on the worker co-op model, a worker co-op is an employee-owned enterprise that follows co-operative principles such as democratic member control and concern for community. Worker co-operatives have a proven track record and a superior survival rate compared to other enterprises.
Over 100 studies across many countries have indicated that employee ownership is linked to increases in firm performance and productivity, greater job stability with fewer layoffs, significant potential to alleviate income inequality and improved quality of the workplace due to workers having greater control, more aligned incentives and increased skills development. In some ways, worker co-ops are similar to other forms of employee ownership; they are just the most democratic form of it. Worker co-operatives are well suited as a strategy for business succession, which is a huge concern as the baby boomer generation retires. Encouraging employee buyouts can help prevent the closure of locally based businesses, including many in rural communities. That is why we are so pleased to see the Government of Canada's interest in introducing employee ownership trusts in Canada and providing modest tax relief to such models in budget 2023.
However, while the government ponders its approaches to EOTs, we also request that the worker co-operative model be provided a level playing field to employee ownership trusts. We kindly ask that the government provide tax changes to worker co-ops that are comparable to those provided to employee ownership trusts.
More specifically, we recommend that the government add worker co-ops to qualifying conditions and definitions in the legislation, since worker co-ops are quite distinct from EOTs. Including language specific to them means they would be able to access these benefits and any future benefits.
Provide business owners who sell to worker co-operatives the same proposed extension, from five to 10 years, for capital gains reserves as those who sell to EOTs. In addition, as those who invest in worker co-ops themselves do not benefit from capital gains tax exemptions, we ask that you consider another tax change that could benefit worker co-ops specifically: Create a federal co-operative investment plan. A program to encourage investment in the sector through a tax deduction on the investment would support and grow the worker co-op sector.
Last, we are advocating that the government ensure entrepreneurs and businesses are not penalized when claiming the small business deduction simply because they are members of a co-operative operating in sectors other than agriculture and fisheries.
In 2016, with the passage of Bill C-29, the federal government brought in measures aimed at preventing multiplication of benefits derived from the SBD. An unintended consequence was that the provisions penalized Canadian-controlled private corporations that are members of co-operatives or whose shareholders are members of co-operatives, because they are now unfairly deemed to be a related party. Although co-ops were not specifically targeted by the measures, they and their members were affected negatively.
To sum up, although the work co‑op model has received little support from governments, it has made it possible to create thousands of high-value jobs in Quebec and the rest of Canada, while supporting workers in often vulnerable sectors.
Although we are pleased to see the Canadian government's interest in worker-shareholder trusts, the Canadian Worker Co‑operative Federation and its members seek equal consideration when it comes to applying tax changes and other incentives to those trusts.
I will be happy to answer your questions.
I want to thank the committee for this opportunity to take part in its pre-budget consultations.