Champagne says it's not a tax play, but critics call the deficit-funded vehicle a "bauble"
Ordinary Canadians will be able to invest directly in pipelines, ports, and other major infrastructure through the Canada Strong Fund but should not expect a tax break for doing so.
Finance minister François-Philippe Champagne clarified Tuesday on the sidelines of the G7 meetings in Paris that the fund's retail component is about participation, not tax relief.
“We already have a number of tax credits to facilitate savings and investments,” he told Bloomberg. “This is not a tax play. This is about Canadians being able to contribute.”
The structure, however, remains unresolved.
Individual investors' principal would be protected, requiring some form of government-backed insurance whose cost and design have not been disclosed, The Globe and Mail European bureau chief Eric Reguly wrote.
The fund would also need to generate returns at least matching 10-year government bonds, which yielded 3.67 percent late last week.
That bar may be difficult for long-horizon domestic infrastructure projects to clear, he noted.
Critics say the fund's $25bn, seeded over three years from a deficit budget, is effectively borrowed money, with borrowing costs not yet factored into return projections.
“To generate public and private investment to be able to compete with the world, Canada needs a big plan, and it’s just not there,” former Bank of Canada governor David Dodge told the Globe.
Champagne, meanwhile, used the Paris meetings to position Canada as an emerging energy superpower, pointing to a memorandum of understanding with Alberta to build a west coast pipeline as evidence of growing international interest.
“Colleagues around the table certainly look at Canada to play a larger role when it comes to energy security,” he said, according to the Financial Post.
The fund remains in development pending consultations, and tax incentives for retail participants have not been ruled out.
