Industry Committee on April 22nd, 2021

[James van Raalte]

Thank you, Madam Chair. I'm happy to share some successes. I'd focus on three areas.

In terms of regulatory co-operation, we have a very strong relationship with our trading partners in the United States; a new free trade agreement with the European Union; and—with provinces and territories—the Canadian Free Trade Agreement.

Under the internal trade piece, I would say the biggest success to date has been strengthening provincial regulation with respect to the building code. That's a long-standing irritant, and I heard Mr. Priddle reference that. You will all know—any Canadian will know—that there are different rules for building, by different jurisdiction and even by different municipality. Thanks to some research and some heavy standard development work by our colleagues at the National Research Council—and quite a bit of collaboration at the provincial level, because that's where it has to happen—we are embarking on a brand new building code process. That is expected to save the Canadian economy a billion dollars a year in construction costs.

With our partners in Europe, there are early regulatory co-operation discussions. The example I will provide may be small, but it's an important first step. Health Canada and the health and safety regulator in Europe have agreed to recognize the safety standards for the safety inspection rules around sunblock in Europe. We've done the same thing in the U.S. It means, from an economic perspective, a savings of $100,000 per product coming into Canada for sale. It's small, but everybody needs sunblock. That's been so successful that Health Canada and the EU have expanded discussions around other non-prescription products developed outside of Canada.

I can also point to our regulatory reviews, which have been a very important instrument for Treasury Board, in terms of removing administrative irritants within the responsibility of regulators but also looking to improved, forward-looking regulatory practices and building innovation. We've completed those reviews in the areas of transport, health and agriculture and aquaculture. Updates on the progress on those improvements were published in the last few months, and we're looking to publish, in the coming weeks, regulatory review results in the areas of international standards, clean tech and digitalization.

[Ali Ehsassi, Liberal, Willowdale, ON]

In the limited time remaining, how is the one-for-one rule faring?

[James van Raalte]

The one-for-one rule is entrenched in the Red Tape Reduction Act, which is a bit of a misnomer because the legislation is intended to control administrative burden. It is doing its job. It is controlling administrative burden.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We'll now go to MP Lemire.

Mr. Lemire, you have six minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair.

My question is for both Mr. Noël and Mr. Lavigne from the Fédération des chambres de commerce du Québec.

Before getting involved in politics, I worked for the Union des producteurs agricoles, the UPA, as the secretary of the Syndicat de la relève agricole d'Abitibi—Témiscamingue, which is a part of the Fédération de la relève agricole du Quebec network.

At the time, one of the most important issues of the day was business succession, especially for farms, and we are still talking about it 10 years later. You spoke of this earlier and I would like to hear what you have to say on the subject.

Nowadays, it is more advantageous for an entrepreneur to sell his or her business to a third party rather than to members of his or her own family. Canadian law states that the transfer of a business to a family member is considered a dividend, and not a capital gain, as opposed to selling the business to a third party. Therefore, the owner is not entitled to a long-term capital gains exemption if he or she decides to sell the business to his or her children.

What are the negative consequences of this regulatory burden on business succession, which goes beyond the next generation of farmers, obviously?

[Philippe Noël]

This rule which is currently in force certainly harms business succession. In Quebec, 32% of SME owners got their start by buying an existing business, compared to 25% for Canada overall. Twenty-three per cent of current business owners in Quebec are intending to sell their business over the next few years, and a third of those wish to sell to a member of their own family. Many businesses don't agree with the rule. Business succession presents a huge advantage. Obviously, you don't have to start up a business dealing with unknowns. Everything is all set up with an existing business. The buyer can count on historical sales, financial forecasts, and in some cases, a client base which is extremely well established. The buyer knows what he or she will earn from the get-go. There are therefore many advantages to business succession, and the federal government should help by ending this unfair policy which unduly penalizes the direct transfer of a business to a member of one's family rather than to a third party. We reckon that if we eliminate this of rule, we can boost the entrepreneurial index, which has been rather lacklustre these past few years.

The Government of Quebec has made changes on its side to negate the unfair effect. But in order to correct the problem fully, the federal government also has to do its part.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

As you probably know, Bill C-208 was debated at third reading at the House of Commons yesterday, which means that things are moving along. I can be quite critical of the way the Conservatives use the House, but on this issue I believe they are showing leadership and are working to ensure that the bill is quickly passed before an election might be called.

Once the federal government finally decides to make changes to eliminate this barrier to business succession, what will be the benefits for the new generation of entrepreneurs?

[Philippe Noël]

There will be benefits for the new generation of entrepreneurs, and I will ask my colleague, Mathieu, to answer the question as well. There will be positive outcomes the day when there is no more unfairness, the day when the measures put in place by the Government of Quebec are matched and the system works. Moreover, the more we increase the entrepreneurial index and business succession, the better it will be for Quebec and Canadian businesses, and this will boost our international economic competitiveness.

I will let my colleague, Mr. Lavigne, tell you more about this.

[Mathieu Lavigne, Senior Consultant, Public and Economic Affairs, Fédération des chambres de commerce du Québec]

Just to quickly conclude on this point, there should always be benefits for the new generation of entrepreneurs, notably family members, especially in difficult economic times such as we are having right now, when entrepreneurs are at the end of their rope. A number of business owners want to sell their business now because they are absolutely exhausted. We have to ensure that businesses are sold to the right people with the least amount of impediments possible, because we don't want to see any businesses go under just because of red tape.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

There is probably no one who is better placed to take over a business than the children who have grown up with the family business, obviously.

Economic statistics for Quebec and Canada show that business succession plans fail in 70% of cases, and that only 10% of business owners are able to find a buyer. Apart from Bill C-208, which seeks to correct the current unfair provisions for business succession, what other factors that fall under federal jurisdiction are impeding the transfer of businesses to a new generation?

[Mathieu Lavigne]

The main factor is section 84.1 of the Income Tax Act. We could also look at lightening the regulatory burden in many sectors, but if we can at least amend the section, it will be a huge step forward.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Did you want to add something, Mr. Noël?

[Philippe Noël]

No, apart from saying that the changes must be made as quickly as possible. Business succession provides for better internal human resource management. Given current labour shortages, you have to send positive signals and help businesses by having the least amount of restrictions possible when comes the time to sell the business, in order to help the business keep going. That's one of the reasons that we've been highlighting the problem over the past few years.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Do you have the impression that Monday's budget will have positive outcomes for the new generation of business owners?

[Philippe Noël]

I think it could have provided more, but overall, we were happy with Monday's budget.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Noël.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to MP Masse. You have six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair, and thank you to our witnesses.

Thank you, Mr. Priddle, for concluding on the question you received with the remark that you didn't want to be perceived as a fly-by-night practice. I've researched your site in terms of your business, and you've done some very progressive stuff. Coming from a manufacturing town, I know that CNC, terminology and the way you approach things are important. I encourage members to visit your website, because I think that gives a lot of credibility to what you're saying, but it also kind of distances you from some of the questions that you had.

Some of the questions you had were on municipal matters and things of that nature, which are beyond our scope unless we actually want to enforce provincial changes. What you did mention, which is something the committee has dealt with in the past, was a SR and ED tax credit.

Maybe you could convey a little of the difficulty you have getting SR and ED tax credits. I'm likely to believe that you're probably actually paying for somebody to help you apply for a SR and ED tax credit as part of the process. I'm just guessing, but please tell the committee about that.

[Tim Priddle]

Sure. SR and ED tax credits are scientific research and educational development credits for work you do. We have not actually received any SR and ED funding. We have looked into it. We've tried a couple of times on our own, and we've been told that we really need to hire a consultant to do that. I alluded to that consultant who will gladly sit down with me and take 20% of the funds he gets for me. I'm still a bit pig-headed; I don't like hiring consultants if I don't have to.

[Brian Masse, NDP, Windsor West, ON]

I don't think that's being pig-headed, just for the record.

I'm sorry to interrupt, Mr. Priddle. I'm going to ask the analysts to look at our history in this committee on SR and ED tax credits, our recommendations and what's come back in regard to that. Applying for SR and ED tax credits, which is actually a federal program, is a business in itself for consultants, as Mr. Priddle has noted, because it's so complicated.

You have not received any because you just decided you didn't want to do that at the end of day—it was too much.

[Tim Priddle]

Yes, at the end of the day, we sat down with folks from CMHC and a few other government organizations, and they said, “Really, Tim, if you want to use this program effectively, you have to hire a consultant. We sit down with the consultants and they chat about these different programs.” I have a list of 18 different programs with SR and ED and IRAP in there.

[Brian Masse, NDP, Windsor West, ON]

Yes, another one.

[Tim Priddle]

I just struggle with the concept of someone getting a commission to get me access to government funds. In my business, we filed an objection to CRA a year ago, which may net our company $100,000 if we're right in our objection. The CRA right now is taking 330 days on average to respond to a challenge, and they only meet that target 70% of the time. I keep thinking in my mind, that's $100,000 or $110,000 that's going to come to us that may push us over the top and get us to develop again or grow our business.

[Brian Masse, NDP, Windsor West, ON]

Yes.

[Tim Priddle]

If there are 10,000 businesses in the same scenario, waiting 330 days for an answer on a pretty basic question, it's really difficult for me.