International Trade Committee on April 27th, 2015

[Michelle Laflamme]

I cannot speak to the format. I don't know whether the R and D tax credit is the best method. I assume people have studied that.

The important thing is to provide support for commercialization. It's too early for venture capital once the R and D work is finished. Even if we embrace risk, it's still too risky. There is a stage in innovation marketing referred to as “the valley of death”. The valley of death is painful, long and difficult. Very few companies make it to the other side.

There are not many of us in Quebec. There is no critical mass of successful people, so the experience is being lost. It's rare for us to be able to find a mentor who has gone through what we are going through. We are always alone in the process. Those who can help us don't really have first-hand experience. It's difficult. In order for good mentors to be available and for us to want to keep going, some companies have to succeed and pave the way for the rest. In my field, the medical industry, almost all successful companies have been sold. People gave up and changed sectors.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Mr. Leclerc or Mr. Drouin, what do you think?

[Guy Drouin]

I can answer the question.

I walked through the valley of death myself. I nearly died of thirst. I am convinced that the tax credit for commercialization is simply an extension of an existing program. The idea is to make commercialization expenses eligible. We limit them only to the workforce involved in commercialization. Plane tickets are not included. It should not become a free for all.

Something in particular helped my company develop technologies. We knew that one program, regardless of the political party in power, would endure. A market cannot be developed in a year. The process can take 10 years. An initial unit that works must be created. After that, people will get involved. It's expensive.

As my friend Denis Leclerc said, it's more expensive to maintain a good invention than to create it. So many programs have been created in Canada to support innovation. There are grants and loans, such as SDTC's follow-on funding program. There are also tax credits, as well as federal, provincial and municipal grants in some cases. But nothing is available for commercialization. Our work is not done. Our knowledge economy must be created. A permanent tool is missing.

[Denis Leclerc]

That is why—

[The Vice-Chair, NDP, Don Davies]

I'm sorry...very quickly, sir.

[Denis Leclerc]

It's a way to keep things simple. That method would help simplify matters.

[The Vice-Chair, NDP, Don Davies]

Merci.

Mr. Shory, you have five minutes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair, and thank you to the witnesses as well.

Mr. Hall, when you were talking about 80 hours, you reminded me of my early days in my law practice when I was called to the bar. I don't know if it was a wise decision or not, but I started my own firm and I did put in as many hours as you said. I guess working hard works out for everyone. Working hard pays off, so good job.

When the budget was tabled last week there were two things for small businesses. There is a reduction of 2% tax for small business over a few years, and there is also an increased maximum earning before a business counts as a large corporation for tax purposes.

I'll start my question to Mr. Hall, and everybody can comment. Do you think that this reduction in taxes would make you put in more than the 80 hours now? Would that encourage you to work harder and make some more money for yourself in your pocket? Would it help all businesses basically here today to expand their businesses and create more jobs?

[Brandon Hall]

I guess the enticement for me to be working the 80 hours is the success of the product and the company, not so much the tax breaks. But a tax break definitely is an added bonus. In times like last year, it wouldn't have mattered much. But now, moving into this year, as the economy is starting to pick up I'm looking at even small tax reductions like that, and increase in earnings before taxability. I will be pushing harder this year to increase sales and expand into new markets as a result of that. So, yes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

We'll go around the table.

[Guy Drouin]

Yes. Of course, we cannot say no to such a measure. But again, we think that the tax break on the commercialization effort over the long term, as we proposed, the tax commercialization tax credit is a perennial measure that will be more helpful than a tax break of 2%.

[Nicolas Letenneur]

I will also talk about the tax credit. Exporting is extremely expensive. So we do need the support. It would be preferable to a tax break.

[Michelle Laflamme]

For companies involved in innovation and in commercializing innovation, it takes time for those kinds of measures to become useful. I think some sort of assistance would be necessary. That is sort of how this was presented. Another criterion may be added, whereby another investor would join in the formula presented. It creates leverage.

That would be more useful than a tax break for us. We are people who are passionate and want to succeed. But we need programs that will put us on the road to success and recognize the fact that we are determined to make things work. I think that little tax measures are enough for high-volume, growth-oriented businesses. Those measures are more useful in such cases, but they may not be for companies like Emovi.

[Guy Drouin]

I may add that when we are making a good profit I'm happy to pay my income tax to the government, because if you make a profit it means you are successful. It's normal to pay tax to the government, so to have a tax break of 2%—

[Denis Leclerc]

So you have two kinds of companies, one paying tax and one hoping to pay tax one day.

[Devinder Shory, Conservative, Calgary Northeast, AB]

We are talking about small companies and start-ups. Everything, I believe, for start-ups is good and helpful.

Mr. Letenneur, I believe you talked about foreign duties, trade barriers as I call them. As I mentioned, and as my colleague alluded, our government envisions free trade agreements and would like to have a level playing field. Our business is to go out of this country and sell products. I'm sure you should be happy with all kinds of free trade.

Besides the free trade agreements, do you think the government should do something else to lower these kinds of barriers or other barriers?

[Nicolas Letenneur]

For a company like mine, a small business from Quebec, the free trade market is more dangerous than enriching. The main reason is that, in my field, free trade will bring to the Quebec market some very large companies, specifically European ones—and that is already happening—that will replace small local businesses. In my context, the free trade market is more damaging than it is beneficial.

Imposing taxes on products similar to mine and complicating their entry through the Canadian Food Inspection Agency would help us much more. It seems to be much too easy for products to come into the country.

[The Vice-Chair, NDP, Don Davies]

Thank you.

Mr. Morin, the floor is yours for five minutes.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Mr. Drouin is from my riding, as is Mr. Leclerc. It's not every day we have green energy experts here.

Could you comment on Canada's position when it comes to the exporting of green technologies? How do we compare with other similar countries? What is our performance like?

It seems to me that we hardly exist compared with Japan, Norway or any other country you can name.

[Denis Leclerc]

In the clean technology sector, Canada has what I would refer to as “pockets of innovation” in some regions and provinces.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Such as in Quebec?

[Denis Leclerc]

In Quebec, we have the benefit of a cluster that helps bring together the entire ecosystem—entrepreneurs, researchers and financiers. That gives an extra boost to the development and commercialization of clean technologies.

Last week, we were in Quebec City for a round table on the green economy. We met a number of stakeholders from western Canada and the Maritimes. At one of the workshops, we concluded by wondering why each province did not have an entity in charge of accelerating technology development and creation. We also concluded that the sector should become a strategic part of the Canadian economy. That is why the Écotech Québec model will be studied in other provinces.

However, other countries have clusters similar to Écotech Québec. Of course, Scandinavian countries are much more advanced than us when it comes to development and commercialization. You should focus specifically on Finland, which has decided to make the clean technology market a strategic sector. It has implemented a number of measures to enable not only development, but also commercialization.

Denmark also has a cluster similar to Écotech Québec in Copenhagen. It is much larger than what we have in Quebec and its results are much more significant. Just to be clear, our results are in line with our means.

We, at Écotech Québec, would eventually like to see clusters like ours in other provinces. Unfortunately, it is currently easier for our companies to do business with clusters outside Canada than with groups in other provinces. It is more difficult to do business in Canada. We think that's absurd.

How can we accelerate that partnership for sharing technologies and needs within Canada? I think that's a challenge we should come to grips with.

[Guy Drouin]

Something else is very important for clean technology development.

We have seen that some European countries have quickly developed clean technologies, especially France and Finland. They set a price on carbon. They have a carbon market.

Quebec just created a carbon market in cooperation with California. I will actually be in Los Angeles tomorrow to attend a major carbon expo. The Governor of California, Mr. Brown, will be there, as will the Quebec and Ontario environment ministers. Ontario actually just joined Quebec in carbon trading.

Setting a price on carbon helps so many green technologies become profitable. That helps create what we call “the 21st century economy”, the new economy. A green economy is more productive. The idea is to produce more with less. It has less of an impact on the environment so it benefits everyone. It also improves our economic system's effectiveness and our current production. At the same time, it protects the planet and makes sustainable development possible.

Finally, by setting a price on carbon, Quebec makes it possible for companies like Biothermica to sell $1 million worth of carbon credits. We announced that in La Presse two weeks ago. It's all thanks to a new technology Biothermica invented. The technology was applied at a coal mine in Alabama to reduce methane emissions. That reduction had a price on the California market. We sold the application for $1 million. That helped me recoup my investment. The $1 million ended up in Biothermica's bank account and was used to pay for wages and for R and D in order to continue improving the company. Of course, it was also used to pay taxes, which is very important.

[Voices]

Oh, oh!

[The Vice-Chair, NDP, Don Davies]

Thank you very much

Mr. Allen, you have five minutes.