Two previous attempts were flops and put far lower price on residency than other countries
The federal government is about to try again to get an investor immigrant program right, after two previous program were abandoned.
OTTAWA — The Harper government is expected to unveil soon Canada's latest attempt to attract multimillionaire investors who have historically had a mixed track record in meeting the public’s expectations — especially in B.C. — after entering the country under so-called cash-for-visa programs.
Canada’s two previous attempts, starting in the late 1980s, were flops, according to critical assessments in recently-released internal documents.
The first program led to a number of scams that cost many foreigners their entire investment, according to briefing notes released under the Access to Information Act. The second, designed to avoid risky investment schemes, failed to produce significant economic benefits for Canada, the documents say.
Both programs triggered resentment in cities like Vancouver where soaring housing costs have been blamed on the deep pockets and aggressive bidding of thousands of super-rich newcomers, including those who have exploited a loophole by entering Canada through Quebec’s separate investor program but never set foot in that province.
The Harper government, which stopped accepting new immigrant investor applications in 2012 and shut down the program earlier this year, has signalled its plans to create a pilot project program to make it both pricier and financially riskier for those who are prepared to part with a portion of their considerable wealth in exchange for permanent residence status in Canada.
Media reports have indicated that the minimum investment will be in range of $1 million to $2 million, with investors required to put money into a venture capital mutual fund. The old cash-for-visa program, killed in the 2014 budget, required investors to place just $800,000 in a five-year, guaranteed interest-free loan, with the money available for use by provincial governments for job-creation measures.
The program provided marginal benefits to governments — the net gain was the difference between an interest-free loan provided to government under the program and the cost of the province can borrowing on open markets at a time when rates are at historic lows.
Officials won’t confirm any details about the program or even reveal when the policy will be unveiled.
“The policy is still in development. We’ll have more to say when we’re ready to announce,” said a spokeswoman for Immigration Minister Chris Alexander.
Will Canada finally get the policy right? Documents analyzing past failures noted that Canada’s original investor program, launched in the 1980s, led to widespread abuse that resulted in the federal government being named in lawsuits launched by aggrieved investors.
Its 1999 replacement, designed to avoid undue risk for investors, ended up going too far the other way.
One 2013 presentation to Alexander and his top officials included a sarcastic and decidedly unbureaucratic headline: “Canada: An International Bargain for the Rich.”
The document noted that Canada’s modest $800,000 requirement sends “the unintentional but implicit (message that) Canada is less attractive and expects less from its investors.”
It noted that Canada charged less than Australia, New Zealand and the United Kingdom, yet was the only country that offered immediate permanent residency status while Canada’s competitors required successful applicants to wait for between two and five years to get residency status.
Vancouver-based lawyer Richard Kurland said the minimum should be at least $2 million, and the minister should have the discretion to increase that figure if demand is high.
The number of new millionaires being churned out by China’s booming economy is ensuring a continuous supply of high-quality applicants, allowing Canada to set the terms, according to Kurland.
“We can afford to cherry-pick.”
McMaster University economist Arthur Sweetman, a frequent commentator on immigration policy, also fears Ottawa will under-price the investor visas.
Like Kurland, Sweetman believes in tougher conditions including requiring investors to immediately start filing income tax returns while reporting both Canadian and global income sources.
And rather than requiring an investment that could lead to profits for the investor, he suggested a $750,000 to $1 million no-strings-attached donation to a Canadian hospital as the price for a Canadian visa.
From 2006 to mid-2014, the federal government confirmed permanent residence status for just over 22,000 people, the majority from China, who stated their intention to live in B.C.
That total doesn’t take into account the thousands who arrived in B.C. while using the Quebec program over that period.
University of B.C. geographer David Ley, author of the 2010 book Millionaire Migrants, has argued that many either retired or operated marginal businesses after arriving and therefore may not have contributed to economic growth.
Of particular concern is the role played by rich immigrants on sky-high real estate prices in cities like Vancouver.
“It certainly appears to be the case” that foreign money has played a role in the growth in single family prices in the core areas of the Lower Mainland, especially the west side (of Vancouver),” according to Tsur Somerville, a University of B.C. professor specializing in real estate finance.
Somerville questions the utility of an investor immigrant program if the money is to be funneled into venture capital.
Canada’s immigration policy, outside of the refugee program, should be based on fulfilling shortages such as the current one involving skilled labour in many regions, he said.
“It’s really hard to see in a country like Canada an argument for investor immigrants. It implies we have a shortage of capital that needs to be addressed.”
BY PETER O'NEIL, VANCOUVER SUN DECEMBER 3, 2014
Photograph by: DESIGN DEPT