Government of Canada is pleased to respond to the Report of the House of
Commons Special Committee on Co-operatives (the Committee): Status of Co-operatives
in Canada (the Report). The Government agrees with the overall intent of
the Report and shares the Committee’s commitment to highlight the importance of
co-operatives and enhance their status in Canada.
tabling of the Report is timely as the United Nations 2012 International Year
of Co-operatives (IYC 2012) came to a close in December 2012. The Government and
co‑operative sector welcomed and celebrated IYC 2012 in order to
acknowledge the important economic and social contributions of co-operatives to
the Committee reported, co-operatives are robust businesses that contribute to
Canada’s economy and meet the needs of many Canadians. In 2008, 9,000
co-operatives and credit unions reported over $252 billion in assets, employed
155,000 people and served 18 million members. Active in almost every sector of
the economy, the co-operative business model has also demonstrated that it has
a high survival rate and is capable of weathering the domestic and
international economic challenges of the recent recession.
Report has also been tabled in a time of economic uncertainty. The Government
delivered Budget 2012 on March 29, 2012, to bolster Canada’s fundamental
strengths and address the important challenges confronting the economy over the
long-term. In this context, the Government remains committed to co-operatives
as an important contributor to economic growth and prosperity for Canadians.
The Response demonstrates that many government departments, agencies and organizations
provide support to Canadian co-operatives across various sectors. The
Government will continue to collaborate with the co-operative sector and
provinces and territories, to ensure that conditions are in place to support
the development, innovation and growth of co-operatives in Canada.
Government has carefully reviewed the recommendations in the Committee’s Report
and welcomes the opportunity to respond to each of the Committee’s
recommendations in full.
the Government of Canada highlight the strategic role that co-operatives play
in our economy by educating government employees in all departments, especially
those in regional development offices, and the general public on the nature and
benefits of the co-operative
Government agrees with the Committee’s recommendation to highlight the
co-operatives play in the Canadian economy by educating government employees
and the Canadian public on the nature and benefits of the co-operative business
Government supported the United Nations 2012 International Year of Co-operatives
(IYC 2012) as an important national event to make all Canadians, including
government employees, more aware of the co-operative business model. Government
support for IYC 2012 included:
$1 million for the International Summit of Co-operatives in Quebec City;
Canada’s 2012 website (www.canada2012.coop); the
publication and dissemination of a Guide to Government Programs Available to
Co-operatives; and, a range of communication initiatives that served to
educate Canadians about co-operatives.
Government promotes long-term economic growth by supporting business and
community economic development through the regional development agencies
(RDAs). The Atlantic Canada Opportunities Agency, Canada Economic Development
for Quebec Regions, Canadian Northern Economic Development Agency, Federal
Economic Development Agency for Southern Ontario, Federal Economic Development
Initiative for Northern Ontario, and Western Economic Diversification Canada
help businesses become more competitive, innovative and productive, and work
with diverse communities and organizations to develop and diversify local
economies. Given this role, co-operatives from various sectors across Canada
have benefitted, and continue to benefit, from RDA support in the form of
funding and business services. RDAs remain open to receiving additional
information on the nature and benefits of the co-operative business model and
to sharing this information with their clients. RDAs also continue to inform clients,
including co-operatives, about the range of available government programs and
Government will continue to highlight the strategic role that co-operatives
play in the economy and provide focused policy and research expertise on the
nature and benefits of
co-operative businesses to government employees and the Canadian public.
Canada Mortgage and Housing Corporation support housing co-operatives by
continuing to provide reasonable mortgage and refinancing services.
Government agrees with the Committee’s recommendation that Canada Mortgage and
Housing Corporation (CMHC) continue to provide reasonable mortgage and
refinancing services to federally-assisted social housing providers through its
Government, through CMHC, has a long history of working with housing
co-operatives, and continues to financially support co-operative housing
projects that provide affordable housing solutions in communities across
supports co-operative housing projects through direct lending, which provides
loans to federally-assisted social housing sponsors. As a federal Crown corporation,
CMHC can obtain funds at rates that are lower than market rates. These rates
are passed through to clients with no profit margin in order to offer the
lowest mortgage interest rate possible. Since January 2009, CMHC’s lending
rates have averaged some three percentage points lower than average market
rates for mortgages with five-year terms. Loans funded through direct lending
are renewable, allowing project sponsors to refinance periodically with CMHC or
a private lender with no penalty. CMHC provides low-cost loans directly to
federally-assisted social housing sponsors seeking to renew their existing
mortgage and to First Nations to finance new housing on‑reserve
constructed under CMHC’s Section 95 Rental Housing Program.
outstanding loans entered into prior to 1979, the majority of CMHC’s lending
programs offered non-renewable, closed mortgages in order to provide long-term
financial stability to social housing sponsors. This benefit was often paired
with ongoing federal assistance and, in some cases, an up-front capital
contribution that was earned over time. These long-term closed mortgages were
provided at or below the interest rates in place at the time.
order to further assist co-operative and non-profit housing projects who want
to refinance their mortgages to undertake the replacement or repair of major
capital building components, CMHC will offer a discounted prepayment penalty.
The discounted penalty will be consistent with industry practices and available
for projects that meet eligibility criteria. This will enable project sponsors
with financially healthy projects to undertake significant capital repair work,
thus extending the useful life of their projects. It will also benefit
low-income households living in the projects including families, seniors,
persons with disabilities and Aboriginal people.
housing co-operatives received more than $120 million in funding under Canada’s
Economic Action Plan to renovate and retrofit their properties. Co-operatives
administered by provinces and territories had access to a larger pool of $850
million in federal funding for social housing renovations and repairs, which
was delivered and cost-matched by the provinces and territories.
the Government invests $1.7 billion a year in support of almost 605,000
households living in existing social housing across the country. Most of this
funding is delivered by provinces and territories, which contribute annually to
the existing housing stock under long‑term agreements with the federal
government. Close to eight percent of the social housing portfolio is made up
of housing co-operatives that are under CMHC’s administration.
Government, through CMHC, continues to work with provinces, territories and
other stakeholders to ensure that Canadians have access to a range of
affordable housing options, including co-operative housing.
the Government of Canada explore the feasibility and cost of allowing Canadians
flexibility to invest RRSP funds in co-operatives.
Government acknowledges the Committee’s recommendation to further explore the
feasibility and cost of allowing Canadians flexibility to invest Registered
Retirement Savings Plan (RRSP) funds in co-operatives.
Government notes that Canadians are already able to use their RRSPs to invest
in shares or bonds of a co-operative corporation, provided that the investments
meet certain conditions intended to prevent self-dealing arrangements that seek
to achieve unintended tax advantages.
addition, Budget 2011, A Low-Tax Plan for Jobs and Growth, introduced
new rules to address concerns regarding the use of RRSPs in tax planning
schemes. One of these measures called the “prohibited investment” rule,
effectively prohibits an individual from holding investments in their RRSP if
they and, generally, their family members (non-arm’s length persons) hold more
than ten percent of the business in which they are investing. This rule applies
to virtually any type of RRSP investment. The rules address two types of
self-dealing concerns that were detected, despite existing restrictions, in
relation to RRSPs:
that indirectly divert income that should have been taxed in the hands of
an individual RRSP saver into the individual’s RRSP; and
strips”, where steps are taken to intentionally reduce the value of a
qualified investment to avoid or reduce tax on withdrawals from an RRSP or
Registered Retirement Income Fund.
transactions were occurring in a small minority of RRSPs, but using a wide
variety of different RRSP investments, including shares in various types of
small enterprises. The Government supports Canadians’ ability to choose from a
range of investments, including
co-operatives, for RRSP saving purposes. The Government also has the
responsibility to ensure that the RRSP system is being used for its intended
purpose of helping Canadians to save for retirement, within the established
system of contribution limits and withdrawal requirements.
the Government of Canada work closely with regional economic development
agencies to highlight the importance of co-operatives to Canadian economic
development so that they can promote the co-operative business model along with
other business models, and to ensure their officers have a clear understanding
of how co-operatives are supported through existing federal programs and can
promote such programs to co-operatives and entrepreneurs.
Government agrees with the Committee’s recommendation that it is important to
work closely across departments and agencies in order to highlight the
importance of co-operatives in Canadian economic development.
Government promotes long-term economic growth by supporting business and
community economic development through the regional development agencies
(RDAs). Co-operatives from various sectors across Canada have benefitted, and
continue to benefit, from RDA support in the form of funding and business
fiscal year 2006-2007 until the beginning of October 2012, the Atlantic Canada
Opportunities Agency has provided co-operatives with over $15 million to support
99 projects in the four Atlantic provinces. In the same timeframe, Canada
Economic Development for Quebec Regions has supported over 30 projects that
benefitted co-operatives in Quebec with more than $4.5 million in funding,
including $1 million to support the International Summit of Co‑operatives
that was held in Quebec City in October 2012. The Federal Economic Development
Initiative for Northern Ontario (FedNor) has provided over $1.3 million in
total assistance to seven co‑operative projects and has worked with the
co-operative sector to raise awareness of FedNor programming available to co‑operatives.
Similarly, in the same time period, Western Economic Diversification Canada has
invested nearly $3 million in eight projects with co‑operatives through
regionally-based and national programs.
Federal Economic Development Agency for Southern Ontario (FedDev Ontario) and
the Canadian Northern Economic Development Agency (CanNor) have also provided
support to co‑operatives since being created in 2009. For example, FedDev
Ontario provided funding support to five co-operatives to facilitate
sustainable growth in official language minority communities. CanNor has
provided $600,000 to assist co-operatives with retail store expansion in the
are eligible for funding from Community Futures Organizations (CFOs) in rural
and remote communities across Canada. RDAs provide operational support to CFOs
under the Government’s Community Futures Program.
addition, Industry Canada (IC), in partnership with the RDAs, delivers the
Canada Business Network, which helps small businesses, including co-operatives,
get relevant and reliable information on government services, programs and
regulations to establish and grow their operations. IC also supports BizPal, a
jointly managed partnership involving governments at the federal, provincial,
territorial and municipal levels, which provides on-line information on permits
and licenses to businesses.
the Canada Small Business Financing Program (CSBFP), which is administered by
IC and delivered by private sector financial institutions across Canada, is a
key program that provides access to financing for small businesses, including
for-profit co-operatives. IC has been working with the national and provincial
co-operative associations to raise awareness of the CSBFP through outreach
initiatives. In addition, the CSBFP website highlights that co‑operatives
can access financing through the program.
Government invests in the development of co-operatives across Canada through
regionally-based and national programs. Given the important role that
co-operatives play in economic growth, the Government will continue to work
with and support co-operatives to further economic development in Canada.
the Government of Canada review the issue of capitalization of co-operatives,
including its causes, effects, and potential solutions.
Government acknowledges the Committee’s recommendation to review issues around
the capitalization of co-operatives, including its causes, effects and
Government understands that capitalization is a significant issue for co-operative
businesses. Co-operatives’ unique common ownership, control and capital
structures and their emphasis on return on use for their members, rather than
return on investment, provides reduced incentive for venture capital and other
forms of traditional financing.
the importance of addressing capitalization and financing issues, the
Government amended a loan guarantee program in 2009 (the Farm Improvement
and Marketing Cooperatives Loans Act program, now called the Canadian
Agricultural Loans Act (CALA) program) to better support agricultural
co-operatives. CALA is designed to help agricultural co‑operatives and
farmers with their financing needs by guaranteeing loans issued by financial
institutions. In addition, between 2003 and 2012, the Co-operative Development
Initiative made advisory services (including financial advice) available to
Canadians and co-operatives across Canada, as well as funding for innovative
co-operative projects. The now completed Agricultural Co‑operative
Development Initiative served a similar function for biofuel and value-added
agricultural co-operatives between 2006 and 2009.
Credit Canada (FCC), a federal crown corporation, also provides financing
options to agriculture related co‑operatives and their members. Over the
last decade, FCC has provided over $1 billion in loans to members of over 30
partner co-operatives located across Canada to facilitate member purchases of
primarily livestock and crop inputs. In addition, the Canada Small Business
Financing Program (CSBFP), which is administered by Industry Canada (IC) and
delivered by private sector lenders, is another key program that provides
access to financing for small businesses, including for-profit co‑operatives.
the current financial context, the Government has also undertaken collaborative
initiatives to ensure that co-operative businesses are fully aware of, and have
easier access to, existing business development funding, programs and services.
To this end, the Guide to Government Programs Available to Co-operatives was
created to list federal and provincial programs and services available to
co-operatives. IC has also been working with the national and provincial co‑operative
associations to raise the awareness of the CSBFP through outreach initiatives.
Moreover, research on the financing needs of co-operatives in Quebec led to the
announcement in October 2012 of a proposed collaborative financing arrangement,
the $30 million Co‑investissement coop. The Business Development
Bank of Canada is participating in this initiative along with the Community
Futures Development Corporations Network in Quebec, Capital régional et
coopératif Desjardins, the Conseil québécois de la coopération et de la
mutualité, and the Government of Quebec, with the aim of financing the
development and expansion of co-operatives across the province.
Government will continue to collaborate with financial institutions, the
provinces and territories and other key stakeholders, working together to offer
a range of business financing and capitalization programs to co-operatives.
the Government of Canada, in consultation with provinces, territories, and the co-operative
sector, review the Canada Cooperatives Act to determine whether updates
Government acknowledges the Committee’s recommendation to review the Canada
Cooperatives Act (CCA), in consultation with provinces, territories, and
the co-operative sector, to determine whether updates are advisable.
legislative and regulatory framework laws are important to provide a favourable
environment for the growth and competitiveness of co-operatives in Canada.
the support of the co-operative sector in 1998, the former Canada Cooperative
Associations Act was replaced with the CCA, which now governs federally
incorporated non-financial co‑operatives. The CCA allows for
co-operatives to incorporate as a right and simplifies the complex rules that
governed the incorporation of co-operatives. The CCA also includes a mechanism
for co-operatives to raise capital by issuing investment shares to the
Government continuously examines all of its marketplace framework laws,
including the CCA, to ensure they are up to date and effective.
the Government of Canada study the possibility of consolidating the
responsibility for co-operatives under a suitable department, such as Industry
Government agrees with the Committee’s recommendation to study the possibility
of consolidating responsibility for co-operatives under a suitable department,
such as Industry Canada (IC).
this end, a review was conducted and it was decided to transfer Agriculture and
Agri‑Food Canada’s co-operative policy and sector support functions to
IC. This will ensure a single, consolidated, focal point in Government to
encourage and support development, innovation and growth in the co-operative
sector. Finance Canada will remain responsible for legislation and regulation
of all federally incorporated credit union associations and insurance mutual
That the Government of Canada continue to reduce the red tape
burden for co-operatives and businesses.
Government agrees with the Committee’s recommendation to continue to reduce the
red tape burden for co-operatives and businesses.
Government is committed to cutting red tape, as announced on October 1, 2012,
through its Red Tape Reduction Action Plan. The Action Plan introduces systemic
changes that will reduce administrative burden on businesses, which can include
co-operatives. This will make it easier to do business with regulators, and
improve service and predictability while continuing to protect the health,
safety and security of Canadians.
For instance, the Canada Revenue Agency is undertaking a red tape
reduction initiative to expand and enhance online services available through My
Business Account. This initiative will improve on-line services for all
businesses in Canada.
fundamental systemic regulatory reforms in the Action Plan will reduce
administrative burden on business: the "One-for-One" Rule and the
Small Business Lens. The “One-for-One” Rule requires that any new
administrative burden on business from regulatory changes is offset through a
commensurate reduction in burden from existing regulations. It also requires
that a regulation be removed each time a new regulation is created. The Small
Business Lens requires regulators to ensure that the particular challenges of
small business are accounted for in regulatory design. Results of both reforms
are available in the Regulatory Impact Analysis Statement published with each
proposed regulation where those initiatives apply in the Canada Gazette.