Finance Committee on Nov. 7th, 2024

[Marc St-Roch]

Thank you for the question.

I'll start with food donations made by agricultural producers. Currently, in Quebec, someone who donates food is entitled to a tax deduction equal to 150% of the value of donations received by the Moisson food bank network. It's a way to reward donors for supporting food banks. The federal plan, on the other hand, allows a 100% deduction. Unfortunately, that doesn't provide any real incentive because the producer has to recognize the transfer as 100% income, so that cancels out the donation. We want the same incentive at the federal level. It would help Canada's food banks.

To address your second question, forest producers develop their woodlots and cut wood. We want them to reinvest in their woodlots to maintain ongoing management of Canadian forests. The system would allow a temporary tax shelter for logging income. Those amounts would be reinvested later on in forest redevelopment. If those amounts are not reinvested, producers would eventually be taxed. The idea is that if they put money into a forest redevelopment program, the tax could be deferred for them. This would therefore encourage them to reinvest in the forest through tax assistance. That would be a way to adequately protect the forest and maintain its resources to ensure production in the future.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

We'll now go to MP Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Ms. Crocker, Canada's population has grown in recent years. I think we reached about 41 million in April of this year. Immigration accounted for about 98% of this growth in 2023, but 60% of that can be attributed to temporary residents.

In your view, what steps should the federal government take to improve pathways to permanent residency for temporary residents?

[Katie Crocker]

That is an excellent question. Thank you.

A step was taken in the right direction with the home caregiver pilot program. That was an opportunity for people to come to provide care for people by helping with children, the elderly or disabled people. That was definitely a step in the right direction.

I think we are missing the mark here in two key areas. One is international students and one is with seasonal agricultural workers.

We need to understand that seasonal agricultural workers in British Columbia account for about 13.4% of the labour market. We have people coming and living in Canada, contributing to the economy, contributing to our food security—food security is a significant issue in this country—and we are not providing pathways to permanency for these seasonal agricultural workers. I think that is a very significant area where we need to see increased pathways to permanence.

We also need to look at strengthening the PNP, the provincial nominee program. Understanding how individuals can access.... We're going to see that the majority of our permanent residents are already within Canada. We've seen that fact during COVID, and we're expecting that to happen with the CUAET visa holders. I would like to see more opportunities for individuals who are coming through those different pathways to be able to access permanency.

[Don Davies, NDP, Vancouver Kingsway, BC]

I want to give you a moment.

I know you do a lot of work settling refugees. What advice would you give the federal government in terms of better policy for settling displaced people and refugees in Canada?

[Katie Crocker]

The priority here needs to be regularization. Our international humanitarian commitments require us to allow people to come into Canada and seek asylum.

With the processes we have in place and the safe third country agreement, the lack of support provided to people seeking asylum is shameful and the fact that we do not have a regularization program is shameful. It's something that we have continuously brought forward, and it has continuously been backbenched. This issue would be our number one priority.

The second thing would be increasing the refugee assistance program rates so that we are not bringing refugees to Canada to live in abject poverty.

We are not creating conditions for success, yet refugees are succeeding. They're succeeding on their own volition. They are not succeeding because they are being adequately supported by us.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Davies.

Now we'll go to MP Kelly.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

I'll go back to Platform Calgary.

You talked about the effect of capital gains on your members.

Could you elaborate on your recommendation around employees and angel investors?

[Dr. Terry Rock]

The way that the entrepreneur incentive has been adjusted did allow for ownership of 5% to be included. The problem is that 98% of angel investors and 98% of employees of start-ups do not have 5% equity, so they are unable to participate in that exemption.

The harmonization with the QSBS in the U.S. is a way to get at this. The structure is provided. It makes us competitive. That's the core of where we think it could go.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

This is another way in which a lack of tax competitiveness with other countries harms our ability to improve our productivity through innovation.

[Dr. Terry Rock]

That's right. That's part of it.

Also, I think that just recognizing the notion that not all capital gains are the same is a good take-away from this meeting.

When we are trying to build these high-growth companies, we're getting a lot of people around the table to help us do that, and we want all of those people to be incented the same way. The way the caps are set up right now, we aren't doing that. Some of the most important parties—angel investors and early employees who are giving up almost as much as founders, in some cases—are cut out.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

All right.

Just for the committee's benefit, it's normal in your sector for employees to be compensated through equity rather than—

[Dr. Terry Rock]

That's right. That's part of the pitch: “Come with us, eat ramen for three years or five years, and then we're going to build something big. We're going to employ lots of people, and that's how we'll get paid at the end of the day.”

It's like that.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

All right.

Mr. Clarke, you talked about how most of the members of your exchanges are small and medium-sized enterprises, so similar arrangements there with some of.... These are small businesses, not large, that are being subjected to the higher tax rate.

[David Clarke]

Yes, that's right.

It is an underappreciated fact of our capital markets. It's something that's totally unique to Canada. It's something that I think we should be prouder of, and we should be doing more to support these growth-stage public companies.

Yes, 75% of the companies on the venture exchange are pre-revenue. Almost all of them would meet any global definition of a small or medium-sized enterprise.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

The $250,000 exemption to the new higher inclusion rate only applies to individuals and does not apply to limited companies.

Does that create tax unfairness when we're talking about entrepreneurs and people involved in start-ups?

[David Clarke]

Well, if you're talking—

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

The cottage owner you mentioned gets a $250,000 break on the increase, but somebody who has invested through a limited company into a small start-up does not receive that same exemption.

[David Clarke]

That's completely correct, yes.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Is it common for small businesses to be structured through a limited company?

[David Clarke]

There are a lot of SMEs that are incorporated and are public companies, but I don't know how common it is for them to invest through that vehicle. Most of the investors in these companies are retail investors, in fact. That's something to note.

One thing I would highlight, though, is that when you talk about those ramen-eating employees of the start-ups, in some cases they already took a tax hit a couple of years ago when the taxation of employee stock options was itself targeted with a new tax rate. Government did some things to carve out smaller companies, but it's actually not the first time they've taken a tax hit in the last couple of years in this way.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Indeed.

If I may, I'll quickly go back to Platform Calgary.

If many of your members are not publicly listed, they will certainly have this differential between those who own their shares individually versus through a company.

[Dr. Terry Rock]

That's correct. Yes, we're working on....

That's it exactly. Most of the large number of companies we're working that are attempting to get listed and attempting to get to that place where they can raise more capital to help them grow more quickly.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

If a business person, such as a professional who has a professional corporation or a small business owner who is saving for their own retirement, chose to invest in a small business and take a chance with part of their investment portfolio on a small business or a tech start-up, they wouldn't get the same treatment that an individual would.