Budget legislation that offers a tax break on co-op earnings is the most important policy change the federal government could make to support the sector, says a co-operative researcher.
Lou Hammond Ketilson from the University of Saskatchewan’s Centre for the Study of Co-operatives said in a Dec. 8 Parliament Hill speech that co-ops are “an under-estimated and overlooked opportunity” in Canada’s economy.
In an interview, she said government support could best come in the form of tax breaks that some provinces have enacted.
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Manitoba offers a tax break on coop earnings, leaving more money for investment. Quebec provides a tax break for people who invest in cooperatives, dealing with the under-capitalization that is a problem for many co-ops.
The House of Commons finance committee has recommended for several years a federal version of the Quebec model that would cost little, attract tens of millions of dollars to co-ops and is recommended by Credit Union Central of Canada. Federal finance minister Jim Flaherty has yet to respond.
“If the federal government wants to support the sector, absolutely the best way would be through tax incentives,” Ketilson said in an interview after a speech to a session organized by the Canadian Federation for the Humanities and Social Sciences and the Canadian co-operative movement. “It would leave the sector to build the infrastructure that it needs to succeed.”
The United Nations has designated 2012 the year of co-operatives, and the Canadian movement is sponsoring a series of events throughout the year, ending with a national conference in Quebec City in October.
In her speech, Ketilson said her research has identified co-ops and credit unions as key players in the Canadian economy, trusted by Canadians at a time when private sector financial institutions are being questioned or under attack from the Occupy movement. More than 10 million Canadians are co-op members.
She said credit unions offer services in many rural and isolated communities where there are no other financial institutions.
They are locally controlled and offer financial services that private lenders are not prepared to do.
She said credit unions exist to service their members and are responsive to local direction, unlike private lenders who serve the interests of shareholders.
Ketilson, an unabashed supporter of the co-operative model, said mainstream economists who criticize them as inefficient miss the point.
“They are making decisions that put their members and their communities ahead of their institution,” she said.
However, co-operatives and credit unions are under-developed and have difficulty attracting investment and growth, she said. A major part of the problem is that most Canadians do not understand co-ops, how they are formed and what benefits they can provide, he said.
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