May 16, 1978

LIB

Anthony Chisholm Abbott (Minister of State (Small Businesses))

Liberal

Hon. A. C. Abbott (Minister of State (Small Business)):

Mr. Speaker, first of all I would like to thank my hon. friend, the member for High Park-Humber Valley (Mr. Jelinek), for his remarks, and for those which were complimentary.

I would like to say that the debate today is a very useful one.

I believe the motion that was put down is a responsible one. It introduces a number of areas to which I have given a good deal of consideration. Some of which I would not view as necessary as others, but within them they possess a good deal of merit. I want to assure my hon. friend and his colleagues who are interested in this area, as well as my own colleagues, that as early as possible I intend to introduce new measures and to bring new programs to bear which I hope will meet some of the points raised here, but which will go a good deal further and do more.

There are, however, one or two areas with which I would take issue. The hon. member spent some time talking about definitions and the importance of such definitions. I have not yet become convinced that this is the most important problem that we face. He and I, and everyone else interested in this area, know what small business is as opposed to big business and I believe this definition suits the general purpose.

The other day I said that a small business is essentially one of 100 employees or fewer which is financially and legally independent. That probably could be qualified. It might be different in numerical breakdown in certain types of business than others. The hon. member's own definition, I believe, is to the effect that a small business is owner managed and not dominant in its field. This is reflective of the United States small business act which does purport to define small business in that country. By their statute they say a small business is deemed to be a firm which is:

"independently-owned and operated and which is not dominant in its field of operations".

Significantly, however, the act then proceeds to delegate to the administrator of the SBA authority to make more detailed definitions using, among others, such criteria as the number of employees and the dollar value of business. Moreover, the legislation specifically notes that, where these criteria are used, the upper limits established may vary from industry to indus-

Small Business

try to the extent necessary to reflect differing characteristics of the industries and "to take proper account of relevant factors".

The problem with a definition is that it tends to be difficult to put in precise words an explanation of what any small business might be. I think perhaps Professor Rein Peterson has best expressed it. Professor Peterson is a teacher at the York School of Business Administration who has written a very good book on small business. He has been associated to some extent with the Canadian Federation of Independent Business. In his comments he says:

In defining small business, we are attempting to grapple with generalizations that in practice must apply to a large and diverse group of legal and economic entities. Therefore, it is somewhat naive to expect that one can come up with a single, simple, concise legal definition of small business likely to be adopted by the diverse interests in an economy. We are also trying to describe a continually moving target group, because relationships between relative size, necessary specialization, and economies of scale-both internal and external to the firm- vary from time to time, from region to region, from product to product, and between one technology and another.

I could go on to quote other authorities that cast some doubt on the essential value of a definition. For instance, my hon. friend may have investments while he is an active member of this House and could not personally manage those investments. He might own a small business but not manage it. If he owned, for instance, a business manufacturing horseshoes in Prince Edward Island, he might own a business that by almost any standard would be described as small but would, I am told, be dominant in its field. Actually such a business exists. Therefore he might want to take advantage of the various programs we have to offer in Canada to small business. More, we hope, will be forthcoming. However, he would be excluded because of the precise restrictive nature of his definition.

I suppose you could say the T. Eaton Company is owned and managed by its owners but is not dominant in its field. It is a major operator in its field. I think the Simpsons-Sears Company would prefer to believe that it is not dominated by the T. Eaton Company. And yet I do not think it would qualify by anyone's judgment as a small business.

You can appreciate that while I do not want to spend the afternoon quibbling with my hon. friend about the merits of one definition over another, he will agree with me that one can get trapped into a easy assumption that some definition will suit the bill and be workable and useful.

I took some exception to another point mentioned by my hon. friend. He was annoyed that the Small Businesses Loans Act-

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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PC

Otto John Jelinek

Progressive Conservative

Mr. Jelinek:

Mr. Speaker, would the minister permit a short question?

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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LIB

Anthony Chisholm Abbott (Minister of State (Small Businesses))

Liberal

Mr. Abbott:

Yes.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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PC

Otto John Jelinek

Progressive Conservative

Mr. Jelinek:

Mr. Speaker, without getting argumentative about the definition situation, I wonder if the minister now is saying that the government does not need a definition for small business and it does not have a general definition, although he has quoted several in the past?

May 16, 1978

Small Business

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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LIB

Anthony Chisholm Abbott (Minister of State (Small Businesses))

Liberal

Mr. Abbott:

Mr. Speaker, I said I had defined small business in a way that I thought was sufficiently adequate when I stated that I thought a business of 100 or fewer employees, which is financially and legally independent, was sufficient to provide a curtain or an umbrella. I differ in some ways with the definition put forward by the hon. member. I went on to cite some interested authorities that say one definition does not suit. I am saying that I feel less concerned, and place a lower priority on the existence of one definition or the other. He and I, and most everyone else who is concerned in this field, know what small business is. I believe the hon. member mentioned in his remarks about the Small Businesses Loans Act that a subsidiary, however small of a major company, should not be included if we are talking about certain beneficial programs, and to that extent I agree.

The hon. member went on to mention the Small Businesses Loans Act, and I want to correct his impression. The Small Businesses Loans Act administration has been moved over and is under my responsibility. This is helpful, because already we have studied the procedures which are required. I believe they can be streamlined and improved upon. A good deal of work is going on in this respect.

In mentioning the Small Businesses Loans Act the hon. member failed to give us credit in the time the secretariat has existed for amending the act and changing the regulations so it is now a far more useful instrument for small business than it had been before. The limit is raised to $75,000. The regulations have been amended so that the interest rate is a point above prime. Because of the fixed interest rate during times of fluctuating interest rates, the bank managers found the bill totally unpopular. Indeed, there has been no encouragement whatever for the use of the act.

I had several conferences with them. If business under the act was unprofitable, the banks preferred to lend money under their own rules or not lend it at all. At our consulting meetings, they agreed with me that they would be prepared to give a lot more support to the act if it were changed. We did that.

We have published a brochure. Thousands have been distributed to bank managers and through organizations such as the CFIB. While we do not have precise figures, I am advised there has been a very substantial increase in utilization of the act. In due course we will have firm statistics on that point. I see the hon. member for Sault Ste. Marie (Mr. Symes) shaking his head. No doubt he has done an exhaustive survey of the volume of business being done across Canada.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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NDP

Reginald Cyril Symes

New Democratic Party

Mr. Symes:

Not in my riding.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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LIB

Anthony Chisholm Abbott (Minister of State (Small Businesses))

Liberal

Mr. Abbott:

They probably have not heard about it yet. If the hon. member would promote the bill and the act with his bank managers, as I have been trying to do, he would find that they are much more responsive. It is interesting that last year there was some $80 million in such loans by the banks under the act notwithstanding the fact they did not like it. I am told

by those managers who are enjoying a higher volume of business that they find it a very good business indeed as a result of greater utilization of the act to the benefit of small business.

The hon. member raised the problem of certain businesses that do not deserve to be able to use the act. I do not think it is all that important. If the banks want to deal with a business that may have an affluent parent company, it does not cost the taxpayers any money. The bank simply takes the guarantee of the federal government to help repay the loan. Assuming it is a solvent subsidiary, the problem of security does not exist. I doubt there are many companies in that area which would need to avail themselves of that. However, that is just a matter of opinion. Considering this is a precise area we have brought up-to-date, I think that contradicts the hon. member's suggestion that we have done very little in that area.

I would add a number of other things that we have done. During the budget debate I discussed such areas apropos of what he was talking about in the area of paper burden. 1 realize he was generous enough to say we have started this program. I would like to see more done more quickly in the area of paper work elimination. However, I am convinced that, given a fair period of time since the organization was set up, very substantial results will be achieved.

I am hopeful that within a few weeks we can place before the public several examples of where the controller of paper burden can demonstrate that he has done his job.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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PC

Henry Perrin Beatty

Progressive Conservative

Mr. Beatty:

Controller of paper burden?

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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LIB

Anthony Chisholm Abbott (Minister of State (Small Businesses))

Liberal

Mr. Abbott:

No doubt much excessive paper work will continue to exist. However, I hope hon. members opposite will be fair minded enough to say that we have made a good beginning.

Something else we have done this year is to open our business centre. It is an efficient, well staffed operation-not lavishly staffed-of competent people. Small businessmen can visit there and receive information, not simply about the work of one government department, but, apropos of what the hon. member was saying, avail themselves of a whole breadth of information. They can have appointments made. They can be taken, not sent, to someone else to get the help they need.

In addition, the business centre, which is located in the Sparks Street building which houses our secretariat, and Industry, Trade and Commerce has a toll free Zenith number, Zenith 03200. Any businessman can telephone from anywhere in Canada. My advice is that it has been very successful and that it has resulted in positive help to the business community. That is a precise and specific measure, and while not earth shaking, deserves support.

We have also introduced a program known as the Small Business Internship Program. We hope it will succeed in providing jobs for a number of Canadian graduates on an internship basis with Canadian small businesses, which can both use the help they are afforded and, hopefully, create permanent jobs.

May 16, 1978

With regard to the question of a small business act, I share to a certain extent the hon. member's view that were we to have an act and create a separate department it would perhaps give the minister a greater feeling of importance. It might give us a function independent of other departments, perhaps of the department in which the secretariat is located.

That, of course, could be achieved. We could bring in an act, and I suppose everybody would support it. Like most acts setting up government departments, it would be relatively brief and non-controversial. We could include in that act certain targets and objectives for the department, and draw from some of the ones in the motion today and others like it.

Upon analysis, however, one has to recognize that a department so created would hardly create a sense of much priority or a sense of great importance, either in the business community or other government departments. Unless you were to allocate to that department a number of functions which may or may not be solely related to small business, the department could stand isolated. It would not achieve any more than what we are capable of doing today within the Department of Industry, Trade and Commerce.

The other problem is that the Department of Industry, Trade and Commerce has a variety of programs. For example, there is the enterprise development program, programs related to tourism, and a variety of others which cannot be severed from their impact on large business or small business. If the department the hon. member would want set up does not have access by right and regularity to these major programs, it would be cut off from the mainstream of government initiatives as they apply to businesses. Although he and I might agree it would give all of us a sense of greater self-esteem to be completely separate, upon analysis it does not have as much merit as appears on the face of it.

The effort and co-operation I receive from my colleague, the Minister of Industry, Trade and Commerce (Mr. Horner), the officials who serve us both, and the growing realization in that department and the whole government of the expanding importance of small business, show that we are being served well. I do not say there is not room for improvement or no need for more programs. I do not say there is not need for changes in our tax structure, statutes of other departments, our purchasing policy, and a whole variety of efforts that, I hope, will ultimately be achieved.

But I think it would be unfair not to pay some tribute to the tax structure which exists today in Canada because it stands preferable to that of any other country in the world. I believe most observers of the small business scene, looking at the tax benefits it enjoys, would agree with that statement. A good many of the most beneficial of these changes were made, I might add, in the spring of 1977. They included a number of proposals such as the favourable measure dealing with employee stock options, income-splitting between family members in unincorporated small business firms, the elimination of federal sales tax for small producers of handcraft, deferral of

Small Business

capital gains on voluntary sales of assets, and the option offered to venture capital investors to choose whether to be taxed on a basis of capital gains or ordinary income. I could go on, but I have already made that speech in the budget debate.

Of course no one should mention the tax system without stressing the importance of the corporate income tax rate for small business, together with the dividend gross-up and credit which provide a significant benefit to businesses with less than $150,000 in income and retained earnings of up to $75,000 which pay some 21 percentage points below larger businesses.

For instance, a taxpayer with $30,000 of income pays only 26 per cent on additional income received from a small incorporated business. A wage or salary earner would be taxed at a rate of 46 per cent on incorporated income. All this shows that the government has not been idle when it comes to producing tax measures. While my predecessor and I cannot claim to have introduced these measures formally, they are the result of advocacy, of influencing the Minister of Finance (Mr. Chretien) to the best of our ability. We believe we can do a better job on those lines than by trying to create a large empire from which we can crow about all the things we have managed to do for small business. It is better to develop a small, hard-hitting organization, to take policy initiatives and to influence our colleagues to put certain changes in place.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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PC

Otto John Jelinek

Progressive Conservative

Mr. Jelinek:

What about the transfer of businesses?

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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LIB

Anthony Chisholm Abbott (Minister of State (Small Businesses))

Liberal

Mr. Abbott:

The hon. member has made reference in the motion to the transfer of businesses and I acknowledge that in our ten-point program we forecast a need for intergenerational transfers. This is something I believe in, and I hope we can achieve it.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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PC

Otto John Jelinek

Progressive Conservative

Mr. Jelinek:

Why was it not in the budget?

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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LIB

Anthony Chisholm Abbott (Minister of State (Small Businesses))

Liberal

Mr. Abbott:

The Minister of Finance had a number of high priorities to deal with and he could not deal with them all. He could not do it this time, but I am hopeful we shall achieve it.

The Minister of Finance is not the only minister who has important areas under his control. The Department of National Revenue does its share to produce an efficient and relatively polite tax-gathering service, but it also imposes some onerous burdens on small business while carrying out its responsibilities. Here again there is a case to be made for influencing the Department of National Revenue to change certain of its procedures.

I do not want to take up more time because I recognize that this is a day upon which the opposition puts forward its ideas. I can assure members opposite, in all honesty, that I appreciate their motion. A good deal of it agrees with my own views and fits in our plans. Anything that is said today will help us. I know that is the attitude the hon. member has taken. I know he is eating his heart out to sit on this side, but if he continues to perform the useful service of telling us his ideas from over there, such a change will never become necessary.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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PC

Henry Perrin Beatty

Progressive Conservative

Mr. Beatty:

The minister explained the various things that have been done since he became Minister of State for Small

May 16, 1978

Adjournment Motion

Business. Can he tell the House briefly why it is that the rate of failure among small businesses has increased during the period he has been minister?

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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LIB

Anthony Chisholm Abbott (Minister of State (Small Businesses))

Liberal

Mr. Abbott:

I did not even begin to scratch the surface of all the things we have been able to do, but I will say this: I do not for a minute suggest that the Minister of State for Small Business can create a climate in Canada that will ensure prosperity. I do not suggest that my efforts have either been mainly contributory or otherwise to present economic conditions. But I will say that I am greatly concerned about the fact that business failures have increased. I worry, as does the hon. member, about the high volume of bankruptcies.

One of the problems is that in prosperous years of high economic growth a good many people get into business. They find the money and they start up. Some of them, it must be admitted, are not all that expert. Dun and Bradstreet, the people who specialize in receiverships, estimate that some 90 per cent of bankruptcies are caused by management difficulties I am by no means blaming businessmen for all their problems, but there is a natural condition that when the economy tightens up it affects small businessmen particularly, and the situation is especially hard for those who lack business skills. That is why the case consultative service we have set up is able to play a really important role in helping small businessmen.

What the higher bankruptcy rate indicates is not so much that small business is suffering unusually but that the economy itself has been going through a difficult time. But there are signs of improvement on the horizon, and we may hope to see a significant reduction in these figures.

Topic:   GOVERNMENT ORDERS
Subtopic:   BUSINESS OF SUPPLY
Sub-subtopic:   ALLOTTED DAY S.O. 58-MEASURES TO IMPROVE SMALL BUSINESS POLICIES
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PROCEEDINGS ON ADJOURNMENT MOTION

SUBJECT MATTER OF QUESTIONS TO BE DEBATED

LIB

Gérald Laniel (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Order, please. It is my duty, pursuant to Standing Order 40, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Simcoe North (Mr. Rynard)-Communications-Television programs for the deaf; the hon. member for Halton (Mr. Philbrook)-Post Office-Plans to prevent incidents leading to workers being sent home; the hon. member for Surrey-White Rock (Mr. Friesen)-National Security-Status of former RCMP officer.

Topic:   PROCEEDINGS ON ADJOURNMENT MOTION
Subtopic:   SUBJECT MATTER OF QUESTIONS TO BE DEBATED
Permalink

GOVERNMENT ORDERS

BUSINESS OF SUPPLY

May 16, 1978