Mr. Speaker, this is the last and final day for working people in the provinces of Ontario and Quebec to invest in labour sponsored venture capital funds as RRSP contributions. Their timeframe has been lengthened due to the time lost during the ice storm.
Indications are that the contributions to labour sponsored venture capital funds for this year will be down dramatically, a total of $505 million by March 1, compared to $1.2 billion in 1995.
The industry officials feel this slide in contribution rates is due to the changes made to the tax system where the rate of contribution or the maximum allowable contribution has been lowered from $5,000 to $3,500. The maximum tax credit was reduced to 30% from 40% and the minimum holding period is raised to eight years rather than the previous five years.
Another rule upsets the industry in that a person is disallowed from reinvesting in a fund for two years if that person withdraws money out of the fund.
All these factors have had a devastating effect on the health of these important financial instruments and we cautioned the government that this would happen were these changes put into effect. At the current rate of decline in less than two years labour sponsored venture capital funds will be out of investment capital to invest in the community.
Conventional lending institutions, chartered banks especially, have not been meeting the needs of industry with adequate supply of venture capital. No matter what they say in their ads or their promotional material the fact is small to medium size businesses willing to expand their operations and grow their businesses and create jobs are being turned down flat when they go to their banks for business loans.
It does not seem to matter how good your business plan is or what your ideas are for increasing your business. More loans are being turned down than are being granted. This is unlike in the United States where banks are required through the community investment act to reinvest some of their profits every year into risk ventures that otherwise would not necessarily qualify for business loans. No such regulation exists in this country.
The banks will tell us about the small business loans they have actually given out, but a more telling figure would be to know how many they have turned down in the same period of time. This is all the more reason then that labour sponsored venture capital funds are important to small business.
In the province of Manitoba 80% of all venture capital put out last year was through the Crocus labour sponsored venture capital fund. In other words small businesses that are tired of going to banks and being turned down end up entering into an equity position with the Crocus investment fund. I am pleased to say there are more businesses in my inner city riding of Winnipeg Centre that have benefited from these funds than any other riding in the province.
The Minister of Finance and his department have stated in letters to the Crocus fund that they recognize the problem. They feel that perhaps they have gone too far in limiting the access to using the funds for RRSP purposes. They have promised to monitor the situation. To quote the Minister of Finance “action will then be taken if the situation warrants it”.
In light of the numbers now made public, $505 million down from $1.2 billion and the fact that within two years these venture capital funds will be out of capital to invest in the community, will the Minister of Finance review the situation now and make the necessary changes for the next RRSP season?