Industry Committee on Dec. 2nd, 2009

[The Vice-Chair, Liberal, Anthony Rota]

We have a point of order, if I can interrupt for a second.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

The question the honourable member is asking is a question for the provincial Government of Ontario. It's not a question for the minister here. With regard to tourism or what elements would be subject to the HST in Ontario or B.C., those decisions are made by the provincial governments. They're certainly not made by the Minister for Small Business and Tourism.

[The Vice-Chair, Liberal, Anthony Rota]

I believe the minister did point that out. I believe the question was whether there have been any studies by the department on the impact. I think that falls under their purview.

[Marie-Josée Thivierge, Assistant Deputy Minister, Small Business and Marketplace Services, Department of Industry]

On that, the Department of Industry has not led any studies specifically on the impact of the HST as it relates to Ontario, or even B.C., but, in that, leadership has really come from Finance and Finance officials.

[Brian Masse, NDP, Windsor West, ON]

So the finance department has conducted a study on tourism, then?

[Marie-Josée Thivierge]

We would have to go back and ask if they have specifically undertaken a study of the impact of HST on the tourism industry, but I'd be happy to take this back.

[Brian Masse, NDP, Windsor West, ON]

Okay.

Madam Minister, do you not think it is part of your responsibility? Nothing happens without the federal government passing legislation. We all know what's happening here. Whether they have debates about who's requesting that it happen and who's not requesting that it happen, it's happening. There's a process that involves the federal government. The process and the end result will have considerable impact on tourism in Canada. Studies have been out in British Columbia, not only with regard to the industry itself, but also involving chambers of commerce. Do you not think it's important for the tourism sector in Canada to be studied prior to the implementation of the HST, so if there's going to be some mitigating to be done, we would know the strategy to do so?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Mr. Chairman, my colleague raises a very good point. As I said, we have been hearing and talking to the industries, especially sectors that have significant concerns. As you mentioned before, that is why the federal government has historically provided, and will continue to provide, transition funding to provinces who decide to move in this direction so they can mitigate some of the effects of it, as you've mentioned. We hope the provinces will be doing that, but these are decisions for the provinces. We have to respect their jurisdiction, and we have to respect their choice in that matter.

[Brian Masse, NDP, Windsor West, ON]

So if tourism goes down in Canada, across the board, because of this measure, you're going to wash your hands of it?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I think you should be a little bit more cheerful than that.

[Some hon. members]

Oh, oh!

[Brian Masse, NDP, Windsor West, ON]

I think it's important, though, because we have a Canadian.... I'm not trying to be too difficult.

[The Vice-Chair, Liberal, Anthony Rota]

In all fairness, I don't think that is a fair question.

[Brian Masse, NDP, Windsor West, ON]

Yes, but we have a Canadian tourism strategy that's being evolved right now, and tax policy is very important in determining how it works. I think there is a responsibility to study that component; otherwise we'll have the same mess elsewhere.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I would just point out to my colleague and to the committee that this government agrees with my colleague about the importance of taxation, and in fact we have taken vigorous measures, which I'm not sure if my colleague supported or not, to reduce taxes on small business, including small business operators and those in tourism, and that has had a very positive effect on their ability to conduct business.

[Brian Masse, NDP, Windsor West, ON]

Just as your good friend Brian Mulroney brought in the GST--and the food service industry is still recovering.

[The Vice-Chair, Liberal, Anthony Rota]

Thank you, Mr. Masse.

We'll go on to Ms. Coady.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you very much, and thank you to the minister for being here this afternoon. This is an important topic, and it's very near and dear to the hearts of Canadians.

We're looking at the recent economic performance of small and medium-sized businesses, and one of the key issues, of course, is access to capital. We know over the last year, according to Industry Canada sources, that the financing approval rate has been declining. Specifically, in 2009, we did ask the banks about this. They talked about less of a demand at their level, as well as some of the challenges with some of the other withdrawals in the community, due to foreign banks and others putting in capital. They said there's kind of a perfect storm here.

One of the things I asked about was Canadian small business financing, and they gave you kudos, of course, for making some of the changes that you talked about with regard to increasing the levels. They did say, however, that there was still a significant administrative burden, and I'm wondering if you, Madam Minister, could just comment on some of those administrative burdens and how you're going to mitigate those concerns.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Mr. Chairman and colleague, I thank you for raising that. We are looking at this program to see what improvements can be made. As you've mentioned, we've already made significant improvements, but we want to do even more.

I'll ask the officials to talk about a couple of things that we may be looking at along that line.

[Marie-Josée Thivierge]

As the minister indicated earlier, a number of changes were introduced to the program in the last budget. One of those changes was the actual amount of funding that was provided to small businesses. In addition to that, there were a number of regulatory changes that were introduced.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I'm not asking about what has been introduced. I've already recognized that the minister and the department have done work in that area. We had the Canadian Bankers Association before us last week, who said again kudos for making that increase and change, and making some changes to the administrative burdens. They are also saying that more work needs to be done--not what has been done, but more needs to be done. There's still a significant barrier there, so I'm wondering on the go-forward what your plans are.

[Marie-Josée Thivierge]

The one thing I would say is that some of the regulatory changes that were introduced were actually changes that we're looking to, to align the program to commercial lending practices of financial institutions. That's what we've been hearing about. So we certainly are seized with a lot of the requests that the banks have been making about introducing some of those changes.

There is a legislative review under way of the program, a five-year mandatory review. This gives us an opportunity to engage with financial institutions and better understand some of the areas that they more specifically want to bring to our attention. So this is very much an ongoing dialogue with financial institutions.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I guess I'm expressing some urgency here. While we have done work--and again, I give you kudos for that--what we're hearing is we have a significant barrier to access to capital. One of the key ways is through the small business financing.

I want to turn, if I may, Madam Minister, to venture capital. We had the venture capitalists in recently and they talked about what they call a perfect storm right now. Especially in the high-tech sector, of course, venture capital is key. It's actually one of the drivers. Banks don't traditionally lend as much as is required in that sector, so they really do need to turn to venture capital.

A point they raised was that there's a real need to change the SR and ED rules, the scientific research and experimental development tax credits. I would like your comments on some of those SR and ED rules that need to be changed, specifically toward ensuring that small and medium-sized businesses, especially in the high-tech area, are encouraged. They also talked about procurement as a way of maybe encouraging investments in the capital funds, and the potential of a substantial fund similar to the ones in Ontario, Quebec, and Alberta, principally to recapitalize the industry. Those are some of the suggestions, and I'd like your comments on those.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you, Mr. Chairman and colleague. I appreciate you raising this. Of course, we have had extensive discussions with the sector as well. The committee may know that the Business Development Bank now has over half a billion dollars in venture capital committed to a number of companies here in Canada. Only this spring, the government invested $350 million in the BDC's venture capital operations. Then in September we announced a further $50 million investment in the BDC to boost venture capital activity in southern Ontario.

Thus, we already have an enormous investment, a large investment, in venture capital. We also provide tax credits to labour-sponsored venture capital to the tune of about $125 million a year. Export Development Canada is also a venture capital investor.

With respect to more specifics on what you asked, I think I'll ask John Connell to add to that. Bear in mind that this is not an area where the Government of Canada has been idle; we've been extremely active in this area.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

In relation to that, Madam Minister, a subcommittee of this committee heard from the vice-president of BDC earlier this spring, and she actually said that there was only so much that could be done. To use her words, there was risk of a whole generation of small businesses failing because of inadequate access to venture capital.

Has anything been done since the spring, when she made those remarks? They did come up in Question Period, so you probably remember that.