Many Canadian laws have an impact on cooperatives. Last April, accounting firm Malette published a study pointing to major disparities in the tax treatment of Quebec cooperatives compared with traditional businesses.
The study showed that owing to a failure of the integration principle, their level of taxation was higher, particularly for investment income, income from subsidiaries and capital gains. This poses an obstacle to the development of Quebec cooperatives.
In its 2011 budget, the federal government proposed extending the notion of “prohibited investment” to include RRSPs. This amendment, set out in Bill C-13, has an impact on the use of RRSPs to invest in cooperatives. A shareholder who, alone or with a related person, holds 10% or more of a given category of shares in a cooperative is considered to hold a “prohibited investment”. That is the case of many small work cooperatives with fewer than 10 workers who are owner-members.
This situation poses a risk for many small cooperatives, especially, as I mentioned, work cooperatives, which are now forced to contend with yet another obstacle to their capitalization.
In our opinion, these two situations demonstrate the importance of maintaining an ongoing dialogue between the cooperative movement and the federal government. We believe that it would be advantageous in such situations for a body representing cooperatives and having adequate resources to be able to have a monitoring role.