Mr. Speaker, this amendment is very positive. I would like to refer, in particular, to the hon. member's comments just now about “related”.
We need to be very careful about “related” and how we define it. It is all very well to argue that we are going to have this very carefully defined through regulation and things of that sort. I agree that has to be done. However, there are times when “related” needs to be defined very clearly in the legislation itself. Perhaps even this definition may fall slightly short of what is needed.
I want to refer to a practice which has happened. I do not know how often it has happened, but I know of at least several instances. A company, which was not such a small business, needed capital of about a million dollars. It discovered that, yes, there was a small business loan that it could get. However, the maximum it could get was $250,000 and it needed $1 million.
With their ingenuity—and a lot of these small business people are characterized by their ingenuity—they said “How can we do this?” They divided the company into four subsidiaries. Each of those subsidiaries qualified for a small business loan. Subsequently, each of those four businesses borrowed to the maximum of $250,000. Lo and behold, the full $1 million was available to the company.
There was common ownership among the four subsidiaries. Obviously, what was happening was that they met all of the technical requirements of the regulations and the provisions of the act; however, they definitely did not meet the spirit or the intent of the legislation. I believe that is really what is behind this motion.
I believe that the hon. parliamentary secretary who spoke a moment ago recognizes full well that that is precisely what is involved here and I hope this amendment makes that very clear.
The other point we need to recognize, which I want to reinforce, is the point that was made earlier by my colleague for Calgary—Nose Hill, which had to do with payroll taxes and the impact those taxes have on the effectiveness and profitability of small businesses and their ability to hire people.
She referred to the Canada pension plan. The point that needs to be added is that over the next four years Canada pension plan premiums will increase by about 71%. There will be no corresponding increase in the benefits received by the individual who subscribes to the pension plan. The difficulty for the businessman who has an employee is that it will cost him an additional $700 a year to have that person on the payroll, and yet the individual does not receive additional benefits. We need to recognize that this is what is happening.
The other point has to do with EI premiums and the hon. member covered that point very well. But we need to recognize that when the two are added together it means that each new employee costs the small businessman roughly $1,200 a year. That is a very significant amount of money. That reduces the bottom line by that amount of money.
I want to draw the House's attention to something I find rather unique. I discovered it in the November 14 weekend edition of the Globe and Mail . What struck me was the logo. The BDC has a new logo. It says “We are a different kind of bank. We are the small business bank”. The ad reads:
Buy Japan without risking principal. The Business Development Bank of Canada, Japanese Stock Index Linked Notes, Series 2, due November 24, 2006. Interest based on 100% of any increase in the Nikkei 225, Japan's major stock market index. If held until maturity, principal is fully protected and paid. Direct obligation of Business Development Bank of Canada, an agent of Her Majesty and right of Canada. No direct foreign currency exposure. RRSP eligible as Canadian contact.
For further information, please call CIBC Wood Gundy Securities Inc. 1-800-563-3193.
In very small print it says:
CIBC Wood Gundy Securities Inc. is a member of the Canadian Investor Protection Fund and a subsidiary of Canadian Imperial Bank of Commerce. The Nikkei 225 Index is intellectual property of Nihon Keizai Shimbun, Inc. (“NKS”) and is compiled and calculated solely by NKS. “Nikkei 225” is a service mark of NKS, which licenses the use of the index and the mark to the issuer of the Notes but does not sponsor or endorse the Notes.
I have a couple of observations. First, in this ad the Business Development Bank of Canada is offering to sell or make available to investors and individuals notes that have guaranteed principal if held to maturity. If we invested $1,000 and we left it until November 24, 2006, we would be guaranteed the full principal on the maturity date.
Preliminary investigations suggest that the notes themselves are backed by a basket of stocks on the Nikkei Stock Exchange, the Japanese stock market. This suggests that the interest is based 100% on any increase in the Nikkei 225. So if there was no increase, then only the principal would come back. If there was a substantial increase, then the value of those notes presumably would increase by the value of that basket of stocks.
This is interesting. It looks to me that these are Japanese stocks that are being talked about, yet it says clearly that there is no direct foreign currency exposure nor is there foreign content. It is RRSP eligible as Canadian content. This is an interesting ad. It requires a lot more study before we get into the detail of what is going on.
I would also refer to the CIBC Wood Gundy Securities Inc., which is a subsidiary of the Canadian Imperial Bank of Commerce. We know that last week the CIBC advised the world and all of its shareholders that in the previous quarter its profit had dropped by 70%, largely as a result of its unsuccessful operation within the investment market.
I am not suggesting that there will necessarily be bad performance. However, the BDC is acting as an agent of the crown, an agent of the Government of Canada, which means that if the stock market goes down, as it did recently, in November 2006, the Canadian people will be responsible for the full principal that has been invested.
If this is a different kind of bank, a bank for small business, I would like to know what in the world is going on. It is incumbent upon the Minister of Industry and the Minister of Finance and even the Prime Minister to look at this and ask “What are we doing with this kind of a corporation in Canada?”