The government claims the program hasn’t paid off for Canada and that it undervalued Canadian permanent residence, others worry about its affect on the economy.
The Canadian Immigrant Investor Program (CANIIP) was established in 1986 to enable qualified investors to obtain permanent resident status in Canada, yet the heavily criticized program was cancelled by the government on Feb. 11 as part of the 2014 budget. The program allowed wealthy foreign investors to apply for permanent residency in Canada if they had a minimum net worth of 1.6 million Canadian dollars ($1.5 million) and invested 800,000 Canadian dollars in the form of a multi-year, interest-free loan to the government.
By comparison, the U.S.’s EB-5 Immigrant Visa Program requires an investment of $1 million or $500,000 in a high unemployment or rural area.
As reported in Canada.com’s article about the cancellation of the program, the reasoning behind Canada’s decision is in the budget documents: “In recent years, significant progress has been made to better align the immigration system with Canada’s economic needs. The current immigrant investor program stands out as an exception to this success.”
The piece further states, “Critics, including Employment Minister Jason Kenney, have said the program is little more than a cash-for-visa scheme that fast-tracks permanent residency for those who can cough up $800,000 which is actually just a loan that’s returned in five years. It’s also not much compared to other countries, which have set thresholds as high as $1.6 million.”
A Little History
By 2010, the decades-old Canadian program had become one of the most popular in the world and one of the least expensive. It was briefly suspended that year while the qualification requirements were doubled. Once the new changes came into effect, it reopened in December 2010.
In July 2012, the program stopped accepting new applicants in order to clear a huge backlog of approximately 60,000 pending applications, about 70 percent of them from China. Estimated time to process the applications was around six years. The application fees paid will be refunded as these applications will not be processed now.
An article in The Globe and Mail cites one businessman as saying that the eight-year process was a destabilizing time in which he, his family and his Chinese investment management firm were prohibited from making long-term plans involving Canada. He had applied so his daughter could go to university here, but she completed a postgraduate degree while they waited.
He further states, “I think it is a good decision to cancel the program. It is so painful for applicants to wait for the result. Instead, Canada should have a more efficient program to attract investor-immigrants.”
A Financial Post article gives this interesting detail on the Canadian program:
“A story in the South China Morning Post found there are 45,000 wealthy Chinese immigrants, with a combined worth of least $12.9-billion, waiting to get into Canada under the program. The number of applicants is six times higher than the number for similar programs run by the U.S., Britain and Australia, the newspaper said.”
“There is also little evidence that immigrant investors as a class are maintaining ties to Canada or making a positive economic contribution to the country,” the government said, adding immigrant investors pay significantly lower taxes over a lifetime than other categories of economic immigrants.
Economic Impact
An article in CNN Money states that the government decided to scrap the program after finding it provided little economic benefit.
"For decades, it has significantly undervalued Canadian permanent residence, providing a pathway to Canadian citizenship in exchange for a guaranteed loan that is significantly less than our peer countries require," the Canadian Ministry of Finance wrote in its 2014 budget report. "There is also little evidence that immigrant investors as a class are maintaining ties to Canada or making a positive economic contribution to the country."
An article in CBCNews – British Columbia quotes West Vancouver real estate agent Clarence Debelle who receives offers from mainland China for luxury property, is now concerned the end of the investor program will have an impact on the local economy and the high-end housing market. "Most of the buying ais coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80-90 percent of the buying in West Vancouver."
Immigration lawyer Richard Kurland agrees. "When you suddenly stave off the intake of literally hundreds of millionaires in the Vancouver property market, prices can only go one way and that's down," said Kurland.
The CBCNews article further quotes Tom Davidoff with UBC's Sauder School of Business, who says the market is driven by other things like low interest rates and the local and global economies. "Given that in the last couple of years, we haven't seen the market cool off, it's hard to believe that freezing the investor market is going to kill even the high-end in Vancouver," said Davidoff.
A BC Business article states that senior economist Robin Wiebe with the Conference Board of Canada conducted a statistical analysis last year that showed a correlation between China’s economic health, such as a rising GDP, and Vancouver’s housing market. In all the speculation leading up to the budget, Wiebe says he heard no indication that the government was going to scrap the program, but thinks the local market can’t help but be affected by fewer investors buying up Vancouver real estate.
The CANIIP will be replaced by two pilot projects: an immigrant investor venture capital fund and a business skills program. However, wealthy investors can still come to Canada through the Start-up Visa Program, which encourages immigrant entrepreneurs to partner with private sector organizations to invest in local start-ups, or the Canadian Experience Class, which fast-tracks residency requests for people who have already lived and worked in Canada.