Thank you, Mr. Chair.
Ladies and gentlemen, members of the committee, I want to thank you for meeting with us today.
It is extremely important for all of Canada's regions that you have a clear understanding of where things stand and that we all support the creation of a tool that will help strengthen the economy and society.
The Conseil québécois de la coopération et de la mutualité brings together about 40 major cooperative and mutual organizations and associations throughout Quebec and Canada. We represent 3,300 cooperatives and mutuals across Quebec, which employ over 92,000 people and provide services to more than 8.8 million members. Together, these cooperatives generate $25 billion in revenues and hold assets estimated at over $173 billion. In 2009 alone, Quebec's cooperatives and mutuals paid out more than $800 million in dividends. When you know that 75% of operations take place in the regions, you realizes that this money goes back to our communities. It represents $85 million in donations, sponsorships and community involvement. That is the incredible power of cooperatives.
In Quebec, more than 30 provincial organizations from all sectors and the Quebec government have endorsed the Declaration on the International Year of Cooperatives. These organizations represent labour, management, economic development, environmental and academic groups, as well as municipal federations. They advocate the creation of conditions conducive to the development of coops and mutuals, tailored to their features and functions and respecting their autonomy. This vast backing clearly demonstrates the strong support of Quebec's socio-economic stakeholders. They recognize the roles that coops and mutuals play in social and economic development, and their ability to contribute to sustainable prosperity by meeting the public's social and economic needs.
A strong economy requires the same kind of diversity in business that occurs in nature. We are absolutely convinced that the Canadian economy will become stronger and contribute to national prosperity if we spur innovation by stimulating the growth of cooperatives in additional fields. Coops in new economic niches address growing needs of Canadians in urban and rural environments. Those needs include renewable energy, domestic assistance and home care, daycare, new immigrant integration, transportation, recreation and tourism, health care, community services, cultural industries and manufacturing industries.
Cooperatives are also an important means of ensuring the survival of businesses confronted by the absence of a younger workforce to replace leaders who are getting older. With a survival rate twice that of other businesses, coops constitute a strong incentive to stimulate and support such undertakings.
The largest coops are now reaping the benefits of globalization as they market Canadian products around the globe. Coops have become thriving economic hubs for thousands of Canadians across the nation. In 2008, some 63% of new coops in Canada were established in Quebec, as compared with 43% in 2004. What happened? Joint efforts by Quebec's cooperative movement and the Quebec government to support cooperatives in their various stages of development have boosted the coop survival rate. That is why the cooperative network must continue offering specialized services to coops as part of its effort to promote intercooperation and the development of viable and sustainable businesses.
This model for supporting cooperative development could indeed be implemented throughout Canada, by relying on relationships with provincial cooperative boards and their partners. The Cooperative Development Initiative was the first step in the right direction. In coordination with provincial measures, the initiative helped the cooperative movement innovate and grow stronger, while giving it leverage.
In Quebec, for that matter, all provincial program administrators sat on a committee overseen by the Conseil québécois de la coopération et de la mutualité to ensure coordination with CDI measures. Thanks to that mechanism, it was possible to avoid all the problems that can arise with program duplication. The stakeholders were able to consider all the projects, providing an efficient way of seeing the big picture.
The fact that cooperatives are owned by their members and that their shares cannot be traded, as with private corporations, is a critical issue in capitalizing coops. The cooperative business model with its “one member, one vote” principle promotes the ownership and control of cooperative businesses. Members, rather than outside investors, hold coop shares.
Coops also typically distribute their profits among their member-owners based on the size of their transactions, in other words, their transactional relationship, rather than the number of shares they hold. These differences make coops stronger: in periods of market fluctuation when the situation is not quite so rosy, coop members have a level of patience that shareholders subject to what we call quarterly tyranny do not. Every three months, shareholders can read about the company's performance in the paper and check whether share prices have gone up or down, and capital levels respond in kind. While coops are much more stable, they are less attractive to venture capital investors.
According to a report by Ernst & Young, globalization, consolidation, technology, environmental protection imperatives and increased competitiveness have boosted coops' capital requirements. They must acquire additional investments from their members to obtain the funds they need. Governmental policies promoting such capital inputs could have a decisive impact on the development of cooperatives, communities and regional economies.
Because Canadian tax laws fail to adequately consider their unique features, cooperatives have to deal with certain fiscal disparities. Take, for example, the flawed application of the integration principle, which has been mentioned already. The integration principle serves as the foundation of our tax system. The choice of legal structure through which taxpayers earn their revenue should have no impact on the amount of taxes they pay. Since cooperatives are not eligible to employ some of the existing integration mechanisms, tax inequities adversely affect cooperative members. Such factors may also deter investment in cooperatives. This is the case with capital dividends, taxation of investment income and taxation of revenue from a subsidiary.
This flaw results in major taxation inequities when it comes to capital gains, for instance. The maximum rate of additional taxation for a cooperative on capital gains is 21%. For investment income, it's 4%, and for income from a subsidiary, that rate is 15%. We have the study done by tax experts at the Mallette firm, which Ms. Gagné mentioned. It points to these exact problems. Given that 2012 is such a milestone year for our movement, we are using this opportunity to call on our governments to examine the situation and rectify these problems.
In addition, holding cooperative shares in an RRSP is turning into a very problematic issue. In the 2011 federal budget, the government made significant changes to the rules for holding cooperative shares in a registered plan. Now, a member of a cooperative is no longer allowed to hold over 10% of a cooperative's capital and is subject to heavy penalties, when it comes to RRSPs. This rule is designed to prevent the circulation of capital and the misuse of measures, situations that do not normally apply to cooperatives because the transfer of RRSP shares is not tied to the organization's decision-making authority. This legislation clearly illustrates the difficulty lawmakers and regulators have when it comes to taking into account cooperatives' unique features.
We have a few recommendations that I would like to call your attention to.
Firstly, we recommend that the government create an environment conducive to the development of cooperatives, tailored to their features and functions.
Secondly, we recommend that the government consider the specific nature of cooperatives in all of its programs, laws and initiatives for business, unless it has specific reasons not to do so. The Government of Quebec recently undertook such a commitment as part of its entrepreneurship strategy. I think the outcome would be very positive if the Government of Canada were to adopt a similar approach.
Thirdly, we are calling on the government to forge a partnership for developing cooperatives to support the creation of cooperative businesses throughout Canada.
Fourthly, we are asking the Canadian government to review the overall fiscal environment for cooperatives to reduce or eliminate inequitable taxation.
I didn't have enough time to go over it in detail, but I will end by underscoring the findings of the Ernst & Young study I referred to earlier. The report mentioned the implementation of a federal cooperative investment plan, similar to Quebec's. Our research shows that this would be an extremely lucrative measure in terms of federal government revenues. So it would not be an expenditure, but an investment.
Thank you.