STATUS OF CO-OPERATIVES IN CANADA Report of the Special Committee on Co-operatives Blake Richards, M.P. Chair SEPTEMBER 2012 41st PARLIAMENT, FIRST SESSION Published under the authority of the Speaker of the House of Commons SPEAKER’S PERMISSION Reproduction of the proceedings of the House of Commons and its Committees, in whole or in part and in any medium, is hereby permitted provided that the reproduction is accurate and is not presented as official. This permission does not extend to reproduction, distribution or use for commercial purpose of financial gain. Reproduction or use outside this permission or without authorization may be treated as copyright infringement in accordance with the Copyright Act. Authorization may be obtained on written application to the Office of the Speaker of the House of Commons. Reproduction in accordance with this permission does not constitute publication under the authority of the House of Commons. 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Additional copies may be obtained from: Publishing and Depository Services Public Works and Government Services Canada Ottawa, Ontario K1A 0S5 Telephone: 613-941-5995 or 1-800-635-7943 Fax: 613-954-5779 or 1-800-565-7757 [email protected] http://publications.gc.ca Also available on the Parliament of Canada Web Site at the following address: http://www.parl.gc.ca STATUS OF CO-OPERATIVES IN CANADA Report of the Special Committee on Co-operatives Blake Richards, M.P. Chair SEPTEMBER 2012 41st PARLIAMENT, FIRST SESSION SPECIAL COMMITTEE ON CO-OPERATIVES CHAIR Blake Richards VICE-CHAIRS Hélène LeBlanc Hon. Mauril Bélanger MEMBERS Malcolm Allen Dan Harris Ray Boughen Pierre Lemieux Ruth Ellen Brosseau LaVar Payne Brad Butt Joe Preston Jacques Gourdes OTHER MEMBERS OF PARLIAMENT WHO PARTICIPATED Joyce Bateman CLERKS OF THE COMMITTEE Paul Cardegna Graeme Truelove LIBRARY OF PARLIAMENT Parliamentary Information and Research Service Mathieu Frigon Khamla Heminthavong Alexandre Lavoie iii THE SPECIAL COMMITTEE ON CO-OPERATIVES has the honour to present its REPORT Pursuant to the Order of Reference from the House of Commons of Wednesday, May 30, 2012, the Committee has studied the status of co-operatives in Canada and has agreed to report the following: v TABLE OF CONTENTS STATUS OF CO-OPERATIVES IN CANADA ................................................................. 1 BACKGROUND TO THE STUDY .............................................................................. 1 CHAPTER I — STRATEGIC ROLE OF CO-OPERATIVES IN THE CANADIAN ECONOMY ........................................................................................................ 2 A. Co-operatives: Definitions and Principles ......................................................... 2 B. National Organizations ..................................................................................... 3 C. Strategic Roles of Co-operatives in the Canadian Economy ........................... 4 1. An Economic Force .................................................................................. 4 2. An Alternative Force for Economic Development ..................................... 7 3. A Stabilizing Force ................................................................................... 8 4. A Force That Increases Market Efficiency: Competitiveness and Competition ................................................................................................ 10 D. Financial Health of Co-operatives in Canada ................................................. 11 1. Canadian Annual Survey of Non-Financial Co-operatives ...................... 11 2. Financial co-operatives ........................................................................... 14 CHAPTER II — FINANCIAL ISSUES RELATED TO CO-OPERATIVES IN CANADA .......................................................................................................... 16 A. Government Intervention in the Co-operative Sector ..................................... 16 1. Rural and Co-operatives Secretariat ...................................................... 16 2. Programs ................................................................................................ 18 a. Co-operative Development Initiative ................................................. 18 b. Other Programs ................................................................................ 18 B. SPECIFIC ISSUES ........................................................................................ 19 1. Housing Co-operatives ........................................................................... 19 2. Taxation .................................................................................................. 20 a. Income Tax ....................................................................................... 20 b. Registered Retirement Savings Plans (RRSP) ................................. 21 3. Competition from Farm Credit Canada in the Agricultural Loans Market 23 vii CHAPTER III — THE ISSUE OF CAPITALIZATION OF CO-OPERATIVES ........... 24 A. Capitalization: Definition and Background ...................................................... 24 B. Institutional Obstacle: Lack of Knowledge of the Co-operative Business Model ........................................................................................................ 26 C. Structural Barriers to Obtaining Financial Capital: Start-up Co-operatives .... 28 1. Venture Capital: Introduction and Background ....................................... 28 2. Raising Venture Capital for Co-operatives ............................................. 29 CHAPTER IV —REGULATIONS AND OTHER ISSUES CONCERNING CO- OPERATIVES IN CANADA ............................................................................. 31 A. Federal credit unions and recommendation of the Red Tape Reduction Commission .............................................................................................. 31 B. Demutualization ............................................................................................. 32 CHAPTER V — CONCLUSION AND RECOMMENDATIONS ................................ 33 APPENDIX A — LIST OF WITNESSES ........................................................................ 35 APPENDIX B — LIST OF BRIEFS ................................................................................ 39 REQUEST FOR GOVERNMENT RESPONSE ............................................................. 41 DISSENTING REPORT BY THE NEW DEMOCRATIC PARTY OF CANADA ............. 43 SUPPLEMENTARY REPORT BY THE LIBERAL PARTY OF CANADA ...................... 53 viii STATUS OF CO-OPERATIVES IN CANADA BACKGROUND TO THE STUDY On December 18, 2009, the General Assembly of the United Nations (UN) resolved to proclaim 2012 the International Year of Co-operatives. That resolution, which recognized the contribution of co-operatives to economic development and social innovation around the world, was supported by Canada.1 United Nations proclaim international years to draw attention to fundamental issues. In proclaiming 2012 the International Year of Co-operatives, the UN urged governments to create a supportive environment for the development of co-operatives and to stimulate their contributions to the overall environment in which they operate. In this context, the House of Commons unanimously adopted the following motion on May 30, 2012: That, a special committee be appointed to consider the status of cooperatives in Canada and to make recommendations by: (a) identifying the strategic role of cooperatives in our economy; (b) outlining a series of economic, fiscal and monetary policies for strengthening Canadian cooperatives as well as for protecting the jobs they create; (c) exploring the issue of capitalization of cooperatives, its causes, effects and potential solutions; (d) exploring whether the Canada Cooperatives Act of 1998 requires updating; (e) identifying what tools the government can use to provide greater support and a greater role to Canadian cooperatives; and that the committee consist of twelve members which shall include seven members from the government party, four members from the Official Opposition and one member from the Liberal Party, provided that the Chair is from the government party; that in addition to the Chair, there be one Vice-Chair from each of the opposition parties; that the committee have all of the powers of a Standing Committee as provided in the Standing Orders, as well as the power to travel, accompanied by the necessary staff, inside and outside of Canada, subject to the usual authorization from the House; that the members to serve on the said committee be appointed by the Whip of each party depositing with the Clerk of the House a list of his or her party’s members of the committee no later