moved:
Motion No. 2
That Bill C-2 be amended by deleting Clause 37.
Mr. Speaker, I would like to explain to members of this House why it is imperative to delete clause 37 of Bill C-2, which reads as follows:
- The Board and its subsidiaries shall invest their assets in such a way that tax would not be payable by them under subsection 206(2) of the Income Tax Act if Part XI of that Act applied to them.
Pursuant to this clause, the Canada pension plan investment board should act as if it were governed by the provisions of the Income Tax Act dealing with the foreign content of pension plan portfolios. This means that the new board would not be allowed to invest more than 20% of its assets outside Canada.
Because we believe the board should have the power to make investments that will best protect the interests of the plan's beneficiaries, clause 37 must be struck from the bill.
In fact, the government should increase and even eliminate the limit put on foreign investments, instead of extending it to other types of investments. We must make sure the board is free to choose the investments likely to provide the best return, regardless of any political consideration.
Also, maintaining restrictions on foreign content could trigger major problems.
First, limiting investments abroad could prevent the board from building a portfolio that is sufficiently diversified to reduce financial risks. We all know that this issue is an important one and that it is time to restore Canadians' confidence in a pension plan that was once their pride.
Second, this constraint also has the effect of reducing the competitiveness of Canadian businesses. Knowing that there is a large and secure capital base on which they can rely, they have less motive to be effective and efficient than if they were in direct competition with foreign companies.
Third, and this is certainly an important concern, it prevents Canadians from receiving a fair return on their pension savings: their money is tied up in a stock market that represents only 3% of the capital in the global market.
Quoted in the Ottawa Citizen , Professor James Pesando from the University of Toronto summarizes and illustrates better than I can the concerns that were raised. He said, and I quote:
“You have heard that expression `don't put all your eggs in one basket'. Just imagine that the CPP fund in the extreme case was invested only in Canadian stocks and bonds and then in 2005 Quebec secedes. That would be devastating in terms of its impact on share prices and bond markets in Canada”.
Professor Pesando continued:
<“Think about what would happen if 50% of those funds were invested offshore. Not only would they continue to do well, but the drop in the Canadian—would mean the returns would be magnified”.
It is not complicated: Bill C-2's provisions setting out the rules on the portfolio's foreign content deprive Canadians of over $700 million annually. By eliminating clause 37, that is by eliminating these rules, the market value of the Canada pension plan could increase by 20 to 25%. This is no small amount. I would even say it is significant.
The government should stop limiting potential investments by millions of Canadians and should act to eliminate this outdated and archaic requirement.
It is in fact that same government that is saying to these same taxpayers that they should be more responsible in financing their retirement. I am saying that the government should act more consistently.
During the electoral campaign last spring, the Progressive Conservative Party clearly stated that it wanted changes to the rules governing registered retirement savings plans in order to gradually eliminate restrictions on foreign investments.
Its main argument at that time also applies very well to the issue of the Canada pension plan today: Canadians have the right to seek the best possible return from the market.
To achieve this, it is essential that the investment board be allowed to make its investments in the best interests of the Canada pension plan's beneficiaries.
That is why I urge my colleagues in this House to vote in favour of this motion.