Evaluation of the Federal Business Immigration Program — 5. Program Performance

Through the program activities undertaken, the immediate expected outcomes for the BIP are: additional provincial investment in economic development; and new business start-ups, job creation and job retention. These immediate outcomes would lead, at the intermediate level, to the following outcomes: selected and admitted BI class immigrants are economically established in Canada; additional job opportunities for all Canadians; and benefits of expanded economic development activities are shared across Canada.

To assess whether these outcomes were achieved, this section includes findings on the program performance, specifically, the economic outcomes of BIs, interprovincial mobility and out-migration, and unintended impacts associated with the BIP.

5.1. Economic Outcomes

This sub-section presents information on the self-employment, investment, and other employment activities of BIs. As such, it will examine the contribution of BIs to business and job creation and will assess the extent to which BIs are economically established in Canada.

5.1.1. Introduction to Economic Outcomes

The intent of this sub-section is to clarify how the evaluation proposes to assess the economic establishment of BIs and to measure, in a conservative way, their economic performance in Canada. Not only are economic establishment and performance concepts difficult to define, but once defined their operationalization and interpretation also poses challenges. Given the nature of the business activities that BIs are likely to undertake in Canada and of the Canadian tax system (such as deductions that can be obtained), the extent of BIs economic performance is difficult to fully assess. As such, the following provides the definition that is used in the context of the evaluation and highlights some elements one should keep in mind when reviewing the results on the economic outcomes of BIs.

Understanding economic establishment

Although there is no formal definition of the concept of being ‘economically established’, the following provides information on CIC’s operational definition and how it was assessed in the evaluation.

As per section 102 of the IRPR, officers shall determine whether BIP candidates, and their families, will be able to become economically established in Canada on the basis of the factors of the selection grid. An “officer may substitute for the factors set out in subsection 102(1) their evaluation of the likelihood of the foreign national’s ability to become economically established in Canada if the number of points awarded is not a sufficient indicator of whether the foreign national may become economically established in Canada”.^{Footnote 23} As described in the operational manuals (OP manual 8 and 9), substitution of evaluation (positive or negative discretion) may be used for economic reasons, i.e., involving the ability to support oneself. As such, based on the operational guidance given to officers through operational manuals, the interpretation made by visa officers of the ability to economically establish when assessing BIP applications (and all economic classes more generally) relies on the premise that the applicant (and their family) will be able to be self-supporting.

However, given that these BIs are economic class immigrants, the expectation is not only for them to be self-sufficient, but also that they contribute, as other economic class immigrants, to the Canadian labour market and economy. As such, this evaluation not only considered whether BIs are economically established as understood by the regulations (IRPR, section 102) and supporting directives (operational manuals 8 and 9), but also assessed more broadly the economic performance of BIs in Canada and their economic activities undertaken in the country after being admitted. Different indicators were examined in that regard. While it is a necessary condition for BIs to not be reliant on social assistance to be considered economically established, the evaluation also included indicators on self-employment and investment activities undertaken in Canada, other income obtained in Canada (such as employment income), taxable income (and taxes paid), as well as the composition of income by different sources to assess the extent to which BIs are becoming economically established in Canada and their economic outcomes.

Data elements to consider

Despite the fact that the evaluation used a multi-faceted approach to understand and examine the economic performance of BIs, there are some elements that should be highlighted regarding the data presented on economic outcomes.

As discussed above, there are no clear definitions or established measures of what is considered ‘economically established’ or what defines a ‘successful’ business (ex.: in terms of business income or size). While business longevity can be perceived as one indicator to define a successful business, there was no longitudinal data on businesses established by BIs that could inform that aspect. It is also difficult to interpret income from self-employment given all the deductions that can be claimed. In that sense, net self-employment income provides a conservative estimate of personal financial assets self-employed individuals may have, and gross figures provides business level information that has limited value in assessing the economic situation of individuals. In addition, much of the data available for the evaluation centers on the individual tax filer rather than on the business itself. As such, to a large extent the analysis looks at the individuals’ contribution to the tax system through employment income tax paid, yet knowing that business activity impacts at the corporate level may not be well reflected.

There are also considerations related to data sources used to inform the different aspects considered. The survey of business immigrants considers BIs who have been admitted to Canada between 2007 and 2011. As the survey was conducted in 2013, some survey respondents will have been in Canada for less than three years. As ENs have three years to comply with terms and conditions associated with the program, survey results may slightly underestimate the proportion of ENs complying with the program’s terms and conditions.

The IMDB can be used to provide information about the Canadian tax filer population only. BIs are a mobile population; while some may definitively leave the country at some point, it can be presumed that many others maintain business activities abroad while being present in Canada. As such, the IMDB only informs about activities reported in Canadian tax system, yet knowing that there could be other sources of income earned abroad that these people use to sustain themselves that would not be captured by this database. For some, IMDB data may reflect only a part of the income they have through personal income taxes, while some others may not be captured in the IMDB as they only file corporate taxes or do not file taxes at all in Canada and live off income earned by other means. As a result, IMDB provides partial information on how individual tax filers are economically established in Canada.

Given all of these reasons, the economic performance of BIs is difficult to evaluate. Considering the different elements discussed, results presented in this section tend to provide a conservative estimate of the economic performance of BIs.

Finding #9 relies on information presented throughout Section 5.1 and presents an overall assessment of the program expected outcome of BI economic establishment using several of the aforementioned indicators for a ‘composite’ finding.

Other findings (Findings #10-16) on specific indicators are also presented for each relevant sub-section.

5.1.2. Self-employment activities

Expectations to undertake self-employment activities for principal applicants of the BIP vary depending on the class under which they were selected. As per the terms and conditions of the program, entrepreneurs are expected to establish businesses in Canada within 3 years of arrival, to maintain that business for at least one year and to actively participate in its management as well as to create at least one full-time position for a Canadian citizen or a permanent resident (other than for the EN or a family member). As such, it is expected that these individuals will establish in Canada through undertaking self-employment activities. Although not bound to post-arrival terms and conditions, individuals admitted under the Self-Employed Persons Class are also expected to pursue self-employment activities in one of the three fields they qualified under (cultural, athletics or farming). The only class under the BIP for which there is no expectation regarding self-employment is the Investor Class, as they have no requirements to meet beyond the one-time refundable investment they have to make in order to be granted permanent residence.

Incidence of self-employment

IMDB data^{Footnote 24} indicates that Federal BIs have higher incidence rates of self-employment income^{Footnote 25} than other economic classes (FSW, PNP and Quebec BIP) and, within BIP, the rates are highest for SEs followed by ENs (Table 5.1).

Source: IMDB

One year after admission, 38.3% of the SEs and 19.6% of ENs declare self-employment income. These figures increase to 42.6% for SEs and 25.7% for ENs three years after admission. Ten years after admission, there is a small decrease in the proportion of the two groups declaring self-employment income, with 40% of SEs and 21.1% of ENs declaring such income. As the decrease in the share of ENs declaring self-employment income happens after the third year in Canada, it suggests that this group may be moving out of this type of activity after having fulfilled their post-arrival terms and conditions.

INs declare the lowest incidence rates of self-employment income and the rates are steady over time, at about 10%. In comparison, FSWs and PNs have higher incidence rates of self-employment income than INs. One year after admission, 10.1% of FSWs and 9.2% of PNs declare self-employment income, reaching 17.2% for FSWs and 16.0% for PNs after 10 years in Canada.

As it may not be the same individuals who declare self-employment income over the years, cumulative rates of declaring self-employment income over time were also examined to provide information on the share of BIs who undertook these type of activities over the period considered. Although it could have been expected that the majority of ENs would have undertaken business activities at one point in time since admission to Canada, IMDB data indicates that only 47.5% of ENs admitted between 1995 and 2010 had undertaken self-employment activities.^{Footnote 26} This share was the highest for those admitted under the SE Class (59.4%), and the lowest for Investors (20.4%). Overall, the proportion of BIs who had been involved at one point in time in self-employment activities (41.3%) was higher than for other economic classes, reflecting the expectations for this class. It is 30.1% of FSWs and 13.9% of PNs who have declared having undertaken self-employment activities in their income tax report at one point in time since admission.

The CEEDD contains information on businesses owned by the immigrant (including BIs, FSWs, and PNs) and the non-immigrant population. The evaluation used these data to look at the situation in 2009 of BIs admitted between 1995 and 2009, in comparison to FSWs, PNs and total immigrants admitted over the same time period as well as non-immigrants.^{Footnote 27} It shows that of the BIs who filed an income tax report in 2009, 11,970 owned at least one business that year. Most (6,530) of those were ENs, and a little less than half were either SEs (2,949) or INs (2,491). As such, 26.5% of BIs admitted during those years still owned at least one business in 2009, representing 35.4% of the ENs admitted, 35.1% of the SEs and 13.6% of the INs.^{Footnote 28}

The BIP survey also collected data on the businesses owned by BIs over time. Although survey results show considerably higher proportion of ENs involved in business activities, survey data generally shows similar trends to IMDB and CEEDD data regarding self-employment for other BI classes and BIs overall. The data indicates that 94.4% of ENs admitted between 2007 and 2011 that were surveyed reported having created, owned or invested in businesses in Canada since arrival. Based on the BIP survey data (as of 2013), 57.1% of SEs and 23.1% of INs said that they had created, owned or invested in businesses in Canada since arrival.^{Footnote 29} Across all classes, 33.7% of BIs who came to Canada in this time period reported involvement in business activities.

In addition to their involvement in businesses in Canada, survey results show that 31.6% of SEs said they had been involved in self-employment activities, other than those resulting from their involvement in any businesses they may have owned. Examples of such activities include contracts by artists for specific events, contracts by athletes with a sports team, or self-employed farmers.

Summary: Overall, despite different measures and approaches used by the methodologies considered,^{Footnote 30} results indicate that BIs are engaged in self-employment activities, even more so than their other economic immigrant counterparts. However, self-employment rates vary widely among the three BIP classes. Among BIs, SEs and ENs are the ones who participated the most in this type of activity, as per program expectations. Although no explicit expectations were set for INs by the program in regards to self-employment activities, a few engaged in this type of activity.

Income from self-employment

The IMDB data include both gross and net self-employment income declared for tax purposes. The gross self-employment income indicates the entire income of the tax filer’s unincorporated enterprise, that is before any costs or expenses are deducted. If there are multiple owners, each partner declares the income of the whole operation. Therefore, gross self-employment income is a reflection of what is in the ‘hands of the business’. It can also be interpreted as the level of economic activity of the business.

Among BIs, it is the ENs who declare the lowest average gross self-employment income, and the SEs the highest. Average gross self-employment income for federal BIs is below $200,000 for all years considered, and they generally have businesses for which they declare smaller gross self-employment income when compared to FSWs and PNs, thus indicating an involvement in modest businesses (Table 5.2).

Source: IMDB

IMDB data also captures information on the net self-employment income, which represent the tax filer’s share of income (either gain or loss) from an unincorporated enterprise after costs and expenses are deducted. As such, the net self-employment income is a reflection of what is in the ‘hands of the individual’. If there are multiple owners, each partner declares their own share (of income or loss). This measure is difficult to interpret. Some money earned in self-employment is an economic return on capital (e.g., use of the individuals own car, own house, etc.) which is not normally the case in paid employment. As such, incomes earned though self-employment may be low, yet a large proportion of expenses could have been covered through deductions.^{Footnote 31} In addition, those unincorporated enterprise owners may choose to take a salary from their business or declare investment gains related to their business activity – this can alter the interpretation that one person makes of their economic activities or contributions. In that sense, net self-employment income information presented below provides a conservative estimate of personal financial assets self-employed individuals may have.

BIs average net self-employment income ranged from $7,200 in year one to $12,700 in year 10. Despite increasing net self-employment income over time, federal BIs have lower net self-employment income than Quebec BIs, FSWs and PNs in all four years since admission, as shown in Table 5.3.

In addition, IMDB data indicate that despite lower incidence rates of self-employment income, PNs, FSWs and INs have higher net self-employment income than SEs or ENs. The gap between net self-employment income of these classes and those of ENs and SEs however diminishes over time.

Source: IMDB

CEEDD also provides information on the gross income of businesses (see Table 5.4). However, this information is somewhat different than in the IMDB as it includes income of both incorporated and un-incorporated businesses (while IMDB captured information on gross income from un-incorporated businesses only)^{Footnote 32}, and it considers all cohorts together, thus not taking into account years since admission. Based on this data, the average gross business income of businesses operated by BIs in 2009 was of $230,000, with ENs having the businesses with the highest gross income ($252,000 on average), followed by SEs ($249,000) and INs ($149,000). In comparison, FSWs and PNs had businesses with smaller gross income ($138,000), while businesses owned by non-immigrants had higher gross income ($349,000).

Source: CEEDD

As indicated in Table 5.4, the gross business income varies significantly depending on whether the business is incorporated or not, with incorporated business constantly having higher income than unincorporated businesses across the groups considered. Gross business income of incorporated businesses of BIs ($440,000) is about 4.5 times higher than for un-incorporated businesses ($98,000). Within BIP, ENs’ incorporated businesses have 4.4 times the income of unincorporated businesses, SEs’ have about 4 times and INs’ about 9 times. The difference between income of incorporated businesses ($1,159,000) and un-incorporated businesses ($66,000) is the highest for non-immigrants with incorporated businesses having over 17 times^{Footnote 33} the income of an un-incorporated business.

As such, incorporation status has a significant impact on gross business income. As discussed later in this sub-section, CEEDD information indicates that some of the businesses owned by BIs (39.2%) are incorporated. Given that incorporated businesses have substantially higher gross income and that the IMDB does not capture information on incorporated businesses, the IMDB figures presented on gross self-employment income would underestimate business revenues of all BIs.

In addition to the two previous sources of data, the BIP survey also gathered information on gross and net annual incomes of businesses established. The average annual gross business income for the first business established by BIs was reported as $151,258, and the average annual net business income was $33,716. The gross income of the business is consistent with gross self-employment income reported by IMDB data on the first years following admission for federal BIs. However, there are differences when looking at net figures: while the survey asked about the net income for the business, the IMDB indicates net figures for individuals.^{Footnote 34} As such, higher figures reported in the survey can reflect the fact that some BIs may have partners with whom they are sharing the profits of the business.

Survey and IMDB data also differ in terms of the amounts reported across BIP classes. While ENs generally reported the lowest gross self-employment income and SEs the highest in the IMDB, the trend is reversed when considering survey results. Survey results indicate that the first business established by ENs have the highest gross annual incomes ($194,823) compared with $100,668 for IN businesses and $96,500 for SE businesses.

In addition to self-employment income from their business, the BIP survey showed that, of those BIs who had established businesses, 51.2% said they received a paycheck from their first businesses. The proportions vary from 57.5% for ENs, to 30% for SEs and 50% for INs. For those who said they received income from their businesses, they reported an average income of $40,754 for all BIs, $35,488 for ENs and $48,128 for INs. The sample size was too small to provide average income for SEs.

Summary: Overall, income from self-employment differs depending on the source of data used. IMDB provides a different picture than when using CEEDD data or the survey of BIs. These discrepancies can largely be explained by the difference in business income between incorporated and un-incorporated businesses. While IMDB does not account for income of incorporated businesses, incorporated businesses were included in CEEDD and survey analysis. In the IMDB, ENs and SEs tend to be engaged in self-employment activities that generate smaller income (both gross and net), while CEEDD and survey data indicate that ENs have higher income than other BIP classes. However, notwithstanding the data sources and measures used, ENs and BIs more generally have gross self-employment income averaging $200,000, which seem to indicate that they are involved in smaller businesses than the non-immigrant population.

Profile of business activities

In addition to income from businesses, the BIP survey gathered information about the number of businesses owned by BIs, how the business was acquired, role of immigrants in managing the business, partnership and ownership share, financial investment in the business, the field of operations of the business and job creation. The CEEDD also featured similar types of information regarding the nature of business activities undertaken by BIs, such as incorporation status, business and industry type and number of employees.

The following sub-section will discuss the nature of business activities of BIs based on these data, with particular attention given to ENs as they have specific conditions to meet regarding business ownership.

Number of businesses owned

As mentioned earlier, survey findings indicate that very few ENs (5.6%) reported not having been involved in any businesses since being admitted to Canada: 76.7% of ENs surveyed said they had created one business, and an additional 17.6% said they had created several businesses. Of those who had reported business activities, the average number of businesses owned by ENs was 1.23.

As per their terms and conditions, the majority of the ENs who created, owned or invested in businesses reported having done so within their first three years in Canada (between 81% and 100% depending on the cohort) and 85.6% of those ENs reported still being involved in their first business at the time of the survey in 2013. Those who reported no longer being involved in their first business indicated keeping it, on average, for 3.3 years (compared to 4.6 years and ongoing for those who were still involved in their first business at the time of the survey). The following reasons were cited by ENs for no longer being involved in their first business: difficult economic conditions (42.2%), business closed down (31.4%), and personal or family obligations (18.4%).^{Footnote 35}

While survey results indicate that proportionately less INs owned businesses than ENs, those who had done so between admission and the time the survey was conducted in 2013 reported having been involved in more businesses (1.43 on average) than ENs (1.23) or SEs (1.19). The percentage of SEs and INs still involved in their first business was also slightly higher (95% and 89.7% respectively) compared to ENs (85.6%). The differences between the three classes on these aspects were, however, not statistically significant.

When considering different admission cohorts, CEEDD information shows similar trends regarding business ownership in 2009. BIs who were involved with businesses owned an average of 1.4 businesses in 2009, representing 1.5 businesses for EN, and 1.4 for both SEs and INs. BIs were involved in more businesses than their FSW and PN counterparts (an average of 1.3 and 1.2 respectively for those who owned at least one business) and non-immigrants who owned, on average, 1.1 businesses.

Business activities indicated by CEEDD also started early following admission. ENs became involved in incorporated businesses they had in 2009^{Footnote 36} shortly after admission; 75.2% had started being involved in that incorporated business within 3 years of admission. In comparison, 48.1% of SEs and 68% of INs had started being involved in their 2009 incorporated business within 3 years of admission.

Business creation

The survey not only collected information on the number of businesses owned by BIs, but also looked into whether those businesses were created by BIs, or whether BIs had acquired existing businesses.^{Footnote 37} For the first business they were involved in, survey results indicate that many ENs (69.2%) reported having created the business rather than having acquired or invested in an existing one (30.8%) and the majority (94%) of them reported having actively participated in the management of that business on an on-going basis. On average, ENs said they had made an initial investment to purchase or start their first business of $151,285, for a total investment between starting the business and time of the survey averaging $307,276.

Ownership share

As per the BIP survey, the majority of ENs (78.7%) reported owning 100% of their enterprise. On average, they reported owning 89.3% of the shares of their first business.

Statistically significant differences exist between BIP classes in terms of ownership share. More ENs reported being the sole owner of their business (78.7%), compared to SEs (66.7%), and INs (40%). As a result, ENs reported owning on average a higher proportion of the shares in their business (89.3%) compared to INs (71.7%).

Incorporation status

The CEEDD information shows that most (60.8%) of the businesses operated by BIs were un-incorporated, while 39.2% were incorporated. A larger share of the businesses operated by SEs (73.1%) and INs (70.2%) were un-incorporated, when compared to those of ENs (51.6%). In comparison to BIs (and ENs in particular), a higher share of the businesses owned by FSWs (72.3%), PNs (75.4%) and non-immigrants (73.6%) were un-incorporated.

Types of business activities for un-incorporated businesses

Un-incorporated businesses may report the following type of incomes: rental, business and professional, farming and fishing as well as commission. As per CEEDD data (see Table 5.5), main business types for the un-incorporated businesses of BIs were ‘Business and Professional’ (44.5%) and ‘Rental’ (41.8%). ‘Rental’ was the main type of business for INs (63.1%), while it was ‘Business and Professional’ for ENs (52.2%) and SEs (42.9%). ‘Farming and fishing’ accounted for a small proportion of unincorporated businesses of ENs and INs (1.6% and 0.8% respectively), but were the second type in importance for SEs (27.9%).

Source: CEEDD

Un-incorporated businesses owned by non-immigrants were of similar types: ‘Business and Professional’ also accounted for most of the un-incorporated businesses owned by non-immigrants (54%), while ‘Rental’ accounted for another 32.2%.

Industry type

The BIP survey asked about the types of activities undertaken by the businesses, and found that 28.7% of ENs reported their first business to be in the ‘retail trade’ classification^{Footnote 38}. The ‘accommodation and food services’ classification accounted for 16.6% of ENs first businesses and the ‘wholesale trade’ classification accounted for 10.9% of ENs first businesses. The balance of business types covered a wide range of categories.

ENs and INs were similar in terms of the types of activities undertaken by the businesses. INs were also highly represented in the ‘retail trade’ classification (22.4%) and in the ‘accommodation and food services’ classification (16.1%). Types of activities were quite different for SEs. 47.4% had established businesses in the ‘agriculture, forestry, fishing and hunting’ classification.

CEEDD data shows somewhat different information as to the industry in which BIs operate businesses (see Table 5.6). It indicates that businesses (incorporated and unincorporated) operated by BIs were most predominantly in real estate and rental leasing (29.5%), retail trade (10%) and agriculture (8%). Businesses operated by INs were most predominantly operating in real estate and rental leasing (48.8%). Businesses operated by ENs were often in real estate and rental leasing (25.6%) as well as retail trade (14%). Businesses of SEs were most often in the agriculture industry (28.8%) and real estate and rental leasing (22.4%). Real estate and rental leasing was also where most of the businesses owned by non-immigrants operated (27.9%), while the second industry type was in the area of professional, scientific and technical services (10.6%). In addition to not being predominantly involved in the same industry types, non-immigrants appear to be less concentrated in a few industries, when compared to BIs who tend to cluster more around certain industries.

NOTE: The 10 industries presented are based on the industry distribution for the Federal BIs.

Source: CEEDD

Employees

According to the BIP survey, ENs reported being involved in small size businesses; 98.2% of the first EN businesses employed 10 employees or less, excluding the EN. Close to half (45%) of those businesses employed family members of the EN in the business. The BIP survey also investigated the extent to which ENs created jobs for people other than themselves or members of their family. The average number of jobs created by ENs in their businesses was reported to be 1.97. About one quarter (23.7%) created one new job and 28.5% said they had created 2 or more jobs. Almost half (47.7%), however, did not report creating a job.

Regarding the number of employees, all SEs' first businesses employed less than 5 people and 90.9% of INs' first business had 10 employees or less.

CEEDD data also shows that BIs operate relatively small businesses. On average, businesses operated by BIs have 1.7 employees in the businesses, with businesses operated by ENs having the most employees (2.3 on average, compared to 1 for INs and 0.9 for SEs). In comparison, businesses operated by non-immigrants are slightly larger in size, with an average of 2.2 employees.^{Footnote 39}

NOC level of positions created

Survey data indicates that the top three skill level requirements for the FTE positions created by ENs required on the job training (NOC D – 49%), secondary school and/or occupational training (NOC C - 36%), and management skills (NOC 0 – 21%). The top three occupational fields for those positions were sales and services (56%), business, finance and administration (23%) and trade transport and equipment operators and related occupations (16%).

Terms and conditions

Overall, the survey responses related to the terms and conditions^{Footnote 40} indicate that 58% of the ENs met their Ts&Cs with their first business, and that an additional 2.4% who did not meet the Ts&Cs with their first business met the requirements with their second business.

Although survey results indicate that about 40% of ENs did not meet the TS&Cs of the program, most at least partially met them. When limiting the analysis on ENs first business only,^{Footnote 41} the majority (94.4%) of the ENs reported having owned a business in Canada. They also reported, for the most part, being the sole owner of their business (78.7%) and to be actively involved in the management of the business on an ongoing basis (94%). Less ENs however complied with the job creation requirement of the program, with almost half (47%) reporting not having created a job in their business.

Perception of the terms and conditions

EN survey respondents were asked to provide their perception of the Ts&Cs. Overall, they found the requirements to manage and own a business (73%) and to create an FTE position (79.4%) within three years to be realistic. However, ENs were generally split in terms of whether they thought the requirements of the program restricted them from effectively starting their business. Close to half (47.6%) of the ENs indicated that the program requirements had limited them in starting up their business. Of those who responded negatively towards the Ts&Cs, many indicated that it was because of the time constraint imposed on creating a business and that they needed more time to establish the business following their admission to Canada. Despite that, the majority of ENs surveyed (78.4%) still believed they would have started the same type of businesses even without the Ts&Cs.

Summary: Overall, the profile of the business activities of BIs demonstrated that they (especially ENs) are often the sole owner of their business, their businesses employed few employees, and are concentrated in a few industries. INs demonstrated the highest concentration of business activities in one industry, with almost half of business activities appearing in CEEDD classified under real estate and rental leasing. In addition, BIs most often own un-incorporated businesses, although ENs differ as they equally own un-incorporated and incorporated businesses. Un-incorporated businesses of BIs are most often related to rental, business or professional services. ENs create or acquire businesses usually shortly following admission and a significant share (60%) is successful in meeting all the requirements of the program.

5.1.3. Investment capital mobilized through the IIP

INs, prior to their admission to Canada, were required by the program to make a one-time refundable investment to be granted permanent residence. Given the different expected outcomes associated with the IN class, the following section examines the investment capital mobilized through the IIP. It discusses how this money was distributed among participating P/Ts and how P/Ts invested it for the purpose of economic development.

INs are asked to make a one-time capital contribution of $400,000 (for those who applied prior to 2010) or $800,000 (for post-2010 applicants) to Canada in the form of a 5-year loan that is refundable without interest at the end of the term. These capital contributions made by INs are redistributed to the P/T funds for investment in economic development. The IRPR state that these P/T funds should use monies received for the purpose of creating or continuing employment in Canada to foster the development of a strong and viable economy. The IN capital fund approach was redesigned in 1999 following consultations with the provinces/territories. Under the new design, there were no specific requirements for the proportion of the capital that had to be placed in active investment. This represented a change from the pre-1999 arrangements that required 70% of the capital to be placed in active investments.^{Footnote 42} This was done to allow participating P/Ts to maintain a balanced portfolio of investments with varying term lengths and levels of risk. Although it was not required to invest 70% of the capital in active investment anymore (as per the 1999 arrangements), the aim was for P/Ts to maintain a balanced portfolio of both shorter term, more secure investments and direct, longer term investments in job creation activities. As such, the intent was that P/Ts would invest directly in economic activities that created or allowed for the continuation of employment.

For comparison purposes, this section looks at investment capital raised through both the federal and Quebec investor programs. From 2007 to 2011, $6.42B of investment capital was raised through the two IIPs combined. The amount of investment funds available from the federal IIP for distribution to the provinces is a direct function of the number of investor immigrants admitted under the federal program. From the annual targets for all business immigrants, including both the federal and Quebec BIP, 41.6% of investor immigrants entered under the federal IIP between 2007 to 2011. The amount of investment funds available from the federal IIP for distribution to the provinces is a direct function of the number of investor immigrants admitted under the federal program; the rest of the IIP funds investments made by investors under the Quebec program go directly to Quebec to account for the number of immigrant investors it selected. As such, less than half of that amount ($2.67B) was raised through the federal IIP (See Table 5.7).

Source: CIC, NHQ – Immigration, and Ministère de l’immigration, de la Diversité et de l’Inclusion (MIDI).

The formula for distribution of these investment funds to the provinces is not related to the numbers of investors destined for each province. The formula includes two criteria: (1) one half of the federal IIP funds are divided equally among the participating provinces/territories, and (2) the other 50% is distributed based on the proportion of total GDP in each province/territory. The structure of this formula helps to ensure that smaller provinces/territories receive a somewhat larger amount of the federal IIP funds than would occur based on single demographic or economic criteria.

The amounts transferred to P/T Funds are net of commissions paid to ‘approved facilitators’ (financial institutions) that provide administrative services to transfer the investments to CIC. Note that during the key informant interviews, the financial institutions stated that most INs borrowed money from those institutions to cover their five-year capital investments. The full interest costs to finance these loans are pre-paid by INs to the financial institutions when the loans are issued. Commissions on the pre-2010 $400,000 investment amount were $28,000 and $40,000 on the post-2010 $800,000 investment amount. The P/T Funds repay the full amount to CIC at the end of the 5-year term, including commissions, which may be equated to the P/T Funds’ cost of borrowing the capital. This cost is equivalent to a compound interest rate of about 1.5% per annum for 5 years for the $400,000 investments and 1.1% per annum for the $800,000 investments. The P/T Funds would be expected to cover their cost of borrowing from returns earned on their investment activities.

The P/Ts IIP fund reports received by CIC showed that, of the $2.67B raised though the federal program, $2.483B of IN investment funds were transferred to participating P/T funds as 5-year loans after commissions have been deducted, with Ontario (41.9%) and British Columbia (14.3%) receiving the highest amounts (Table 5.8).

Table 5.8:  Summary of federal IIP allocations of investment funds by province/territory, 2007-2011

Source: CIC NHQ-Immigration, 2013

The P/T reports on the use of the funds also showed that of the total amount transferred to P/Ts, only $751.8M was allocated to active investments for 5 years (such as business loans, infrastructure projects and venture capital funds). This represents approximately 30% of the total IN funds transferred to the P/T funds from 2007 to 2011. The balance of the capital is held in a combination of interest-earning investments (such as bonds) and cash equivalents to ensure liquidity for loan repayment to CIC by the P/T funds.

The share of funds that was actively invested increased over the years considered, never exceeding a third of the amount being actively invested. A CIC analysis^{Footnote 43} has demonstrated that in 2008, only 11% of the total IIP capital was actively invested in economic development projects (6% in infrastructure projects and 5% in loans to SMEs), and that by 2011, 33% of the total IIP capital was actively invested (23% in infrastructure projects, 9% in loans/grants to SMEs and 1% in venture capital projects).

Review of information submitted by the P/T funds to CIC on investments of IIP funds from 2007 to 2011 shows that the proportions invested in active investments vary across the provinces depending on their investment strategies. The share of funds that were actively invested is strongly influenced by figures from Ontario (41.9%) since it received a major portion of the federal IIP funds, and the Ontario fund was not undertaking ‘active’ investments during the period from 2007 to 2011.

Based on data reported to CIC by the P/T funds, a total of 10,781 FTEs were created through these P/T fund investments.^{Footnote 44} However, as P/Ts did not submit reporting to the extent required under section 95 of the IRPR, it reduced the ability of the evaluation to explore the nature and type of positions created through the use of the funds.

As agreed to with P/Ts during consultations on the program design, the aim was for P/Ts to hold a balanced portfolio of both shorter term, more secure investments and direct, longer term investments in job creation activities.^{Footnote 45} The review showed that, over the period considered, this balance was not achieved. As there was a limited proportion of the P/T funds (30%) that was actively invested between 2007 and 2011, if more had been invested actively, the impact on the development of a strong and viable economy may have been greater.

5.1.4. Post-admission investment

Investments made by BIs after their admission to Canada were also examined. Although there are no requirements for BIs in each of the three classes to carry out investment activities in Canada after being admitted, given the profile of these individuals, this may represent an important part of their economic establishment in the country and their impact on the Canadian economy.

Indeed, many BIs did invest, and as a result, drew a part of their income from investment.^{Footnote 46} The IMDB data show that many BIs declared investment income (incidence varying between 53.3% and 66.5%) (Table 5.9). Among BIs, INs have the highest incidence of investment income. One year after admission, 78.5% of INs, 63.8% of ENs and 55.3% of SEs declared investment income. Ten years after admission, incidence rates decreased to 68.7% of INs, 47.6% of ENs and 52.2% of SE declaring investment income.

Overall, BIs are more likely to declare investment income compared to FSWs (varying between 36.8% and 41%) and PNs (varying between 21.0% and 34.3%).

Source: IMDB

Average investment incomes vary among the BIP classes as shown in Table 5.10. On average, federal BIs declare investment income ranging between $7,500 one year after admission and $10,300 ten years after admission. On average, INs declare the highest investment incomes among BIs (with investment incomes ranging between $11,100 and $12,000) and ENs the lowest (with investment incomes ranging between $5,300 and $8,600).

Investment income amounts declared by BIs are generally higher than those declared by PNs (ranging between $5,400 and $9,200) and FSWs (ranging between $2,000 and $4,500).

Source: IMDB

The BIP survey also provided information on investment in Canada. It gathered self-reported information on the incidence and amounts of investment (but did not collect data on income from investments). Survey results indicate that 50.1% of BIs who were admitted from 2007 to 2011 said they had made investments in businesses, real estate or other types of investment in Canada by the time the survey was conducted in 2013. Statistically significant differences were found in the proportion of each BIP class that report having invested after being admitted to Canada, with 79.2% ENs reporting making investments compared with 63%% of SEs and 44.7% of INs.

These findings differ from what was found through IMDB analysis, where INs declared the highest incidence of investment income over time when compared to other BIP classes and ENs the lowest. These differences can be explained by the fact that different concepts are measured by the two data sources. While the survey asked about any investments that were undertaken by BIs since coming to Canada as a permanent resident, the IMDB indicates the proportion of individuals reporting investment income^{Footnote 47} over time.

Survey results indicate that of those BIs who reported having invested, 40% said they had invested in businesses. This represented 81.9% of ENs, 30.4% of INs and 17.9% of SEs (Table 5.11). In addition, 54.4% of BIs said they had invested in residential or commercial real estate, including 71.4% of SEs, 58.9% of INs and 32.5% of ENs. As well, 28.9% of BIs said that had other types of investment (12.0% of ENs, 28.6% of SEs and 33.7% of INs). Statistically significant differences were found for the types of investment undertaken by the different BIP classes.

Source: BIP Survey

The average investment amount for all BIs who reported investments after being admitted to Canada was $834,886. However, the amounts invested varied significantly between the classes, with an average investment of $392,064 for SEs, and $417,307 for ENS, while the average investment was over 1 million for INs ($1,060,000).

5.1.5. Employment income

Incidence and average employment income

The IMDB data show that less than 40% of BIs declare employment income^{Footnote 48} over the years (Table 5.12). Based on these data, incidence rates for BIs are highest for ENs (between 36.4% and 43.9%), and lowest for INs (between 26.5% and 32.5%).

BIs have lower incidence rates of employment income compared with FSWs and PNs, and rates for BIs increase only slightly over time. FSWs and PNs have twice higher rates of declaring employment income (over 80% for the PNs and 75% for FSWs) than BIs (less than 40% report employment income). This pattern is consistent with expectations for the different economic classes, where FSWs and PNs are expected to undertake paid employment once in Canada, as opposed to ENs and SEs who are expected to focus on self-employment and business creation.

Source: IMDB

Average employment income of BIs varied between $20,900 one year after admission and reached $29,600 after ten years in Canada (Table 5.13). Among federal BIs, the SEs declare the highest employment income (ranging between $25,700 and $32,800), and ENs the lowest (ranging between $17,600 and $30,100).

Average employment income for BIs are also lower than for FSWs and PNs. BIs' employment income were about half those of FSWs and PNs. Comparatively, FSWs earned $61,000 and PNs $41,800 after having been in the country for 10 years.

Source: IMDB

5.1.6. Taxable income and taxes paid

Earlier sub-sections presented information on the incidence and income drawn by BIs from self-employment, investment and employment activities separately. While informative on the different activities undertaken by BIs, it does not provide overall information as to their taxable income and their personal contribution to the tax system. This is what this sub-section achieves.

The IMDB provides information on taxable incomes of immigrants^{Footnote 49}. These data show that, among federal BIs, ENs had the lowest taxable income in the first 5 years after admission, while it is the investors who declare the lowest amounts in year 10. After 10 years in Canada, INs declared taxable income of $15,800 while ENs declared $19,200 and SEs $22,100 (Table 5.14).

Based on the IMDB data, the evaluation indicates that BIs generally have less than half the taxable incomes of FSWs and PNs. Further, the taxable income of BIs increases at a slower pace than that of FSWs. Over 10 years, taxable income of BIs increased by 28%, while FSWs' income increased by 67% over the same time frame. As such, the difference between BIs and FSWs incomes increases over time. One year after admission, PNs declared on average $44,000 and FSWs $28,000 while federal BIs declared an average taxable income of $15,000. Ten years after admission, FSWs earned more than PNs ($46,800 vs. $37,900) while federal BIs still earned substantially less ($19,200).

Lower taxable income is a reflection of the type of income earned by BIs. BIs have higher incidence of self-employment and investment income than FSWs and PNs, and lower incidence rates of employment income as expected. As such, it is challenging to measure the income of the BIs and the actual level to which they are economically established compared to other immigrants. Unlike their economic immigrant counterparts who derive most of their income from employment, the primary sources of income for BIs are self-employment or investment income. Given all the deductions that can be made through self-employment and that investment income can be accumulated throughout the years and only taxed when consumed by the individual, actual income of BIs may amount to more than what is suggested by the taxable income they report.

Source: IMDB

Reflective of the lower taxable income of BIs, the IMDB data show that BIs pay lower personal income taxes^{Footnote 50} than FSWs and PNs although the amount of personal income taxes paid by ENs and SEs generally increases with years since admission (Table 5.15).

Source: IMDB

Average personal income taxes paid by federal BIs vary between $1,500 on the first year after admission and $2,600 after ten years. In comparison, FSWs paid on average between $5,600 one year after admission and $10,900 ten years after admission, and PNs paid $10,000 and $7,800 for those years.

Among BIs, ENs and INs paid lower taxes in the fifth year after admission ($1,800) than SEs ($3,000). Ten years after admission, INs paid the lowest taxes ($1,400) compared with $2,800 for ENs and $3,300 for SEs.

5.1.7. EI and SA benefits received

In addition to looking at the income earned from self-employment, investment and employment, the IMDB also provides information on the use of Employment Insurance (EI) and Social Assistance (SA)^{Footnote 51} to determine to what extent BIs are self-sufficient or relying on support.

Receipt of EI benefits is related to incidence of employment and payment of EI premiums through employment. Given the higher incidence of employment income among FSWs and PNs when compared to BIs, it could be expected that a higher proportion of these two groups would be eligible for EI benefits. As such, the Table 5.16 below shows that BIs have much lower incidence rates of receiving EI benefits than FSWs and PNs.

Source: IMDB

Incidence rates of EI benefits for BIs vary between 0.7% and 2.7%, which is substantially lower than for FSWs (vary between 6.7 and 12.1%) or PNs (vary between 9.7 and 19.3%). Among federal BIs, SEs have somewhat higher incidence rates of receiving EI (up to 3.9%) than ENs and INs.

Source: IMDB

BIs also have very low rates of receiving SA benefits (Table 5.17). Incidence rates from one to ten years after admission range from 0.6 to 2.3%. Although also low, incidence rates for SA are higher for FSWs (ranging from 2.7% to 6.4%) and PNs (ranging from 0.8% to 2.6%) than for BIs.

5.1.8. Profile of income sources

The previous sub-sections discussed to what extent BIs draw their income from self-employment, employment and investments activities. This sub-section focuses on the composition of their income.

Most BIs have incomes from one or more sources. The IMDB data show that the majority of federal BIs (ranging between 82.4% and 88.4%) declare employment, self-employment and/or investment income from year one to year ten (Table 5.18). Among federal BIs, INs and SEs generally have higher incidence rates than ENs, who have the lowest rates (80.3% to 86.5%) over the ten years after admission.

Source: IMDB

Combination of income sources

To better understand the incomes of BIs, the evaluation looked at the different combination of types of revenues an individual may declare in a given year (see Appendix F, Table F-1). This analysis found that the most prevalent earnings profile among federal BIs is:

• to declare investment income only (from 35.5% one year after admission to 25.6% 10 years after); and
• to declare both investment and employment income (from 19.7% one year after admission to 16.6% 10 years after admission).

Most prevalent earnings profiles are the same for INs as for federal BIs. About half of INs only declare investment income (51.5% one year after admission to 45.8% 10 years after admission), and another significant share declares both employment and investment income (from 21.1% one year after admission to 16.1% 10 years after admission).

Although those two earnings profiles (investment income only / investment & employment income) are also the most common for ENs and SEs, immigrants admitted under those classes appear to be more diversified in their combinations of sources of income than INs.

Main source of income

As many BIs declare more than one type of income, the evaluation also wanted to better understand which of employment, self-employment or investment income provide the majority of the incomes declared by BIs (see Appendix F, Table F-2).

About 60% of BIs have self-employment or investment income as their main type of income over time, with the remaining 40% relying more heavily on income from employment. Among BIs, ENs are the ones who tend to rely more on employment as their main source of income (38.9% to 48.4% over time), while the majority of INs rely on investment as their main source of income (64.9% to 60.9% over time). SEs are more equally split in terms of their reliance on each of the three income type as main source of income. A significant share of them receives most of their income from self-employment (representing more than 35%) or from investment (about 25%), while another share receives most income from employment activities (representing more than 35%).

5.1.9. Summary

As a sign of BIs' economic establishment in Canada, the evaluation observes that very few rely on SA or EI and the majority report income from self-employment, investment or employment activities. However, their economic performance is lower than that of other economic classes. They declare considerably lower personal taxable income than FSWs and PNs, and as such pay substantially less personal income taxes. Given the different nature of the income reported by BIs (self-employment and investment income) as opposed to FSWs and PNs (employment income), it is difficult to directly compare the incomes of BIs to those of their other economic counterparts.

The BIP, through the initial investment made by INs and the self-employment activities undertaken by ENs, contributed to creating businesses and additional job opportunities for all Canadians. According to P/T reports on the use of funds, IN investment funds have resulted in active investment by P/T funds of $751.8M and creation of 10,781 FTEs. However, only about 30% of IN capital has been actively invested in the period from 2007 to 2011, and the economic impacts would have been greater if a higher share of the IIP funds had been invested. In addition, survey results indicate that about 60% of the ENs met the Ts&Cs associated with the program. As such, ENs also contributed to business and job creation.

In addition, BIs undertook investment and business activities in Canada beyond the requirement of the BIP, which further contributed to the expected outcomes of the program of creating businesses and additional job opportunities for all Canadians.

5.2. Interprovincial Mobility & Out-migration

To understand the extent to which the program resulted in additional job opportunities for all Canadians and whether the benefits of expanded economic development activities are shared across Canada, the following sub-section focuses on interprovincial mobility and out-migration of BIs.

5.2.1. Interprovincial mobility

The analysis of the mobility of BIs across Canada looked at the intended province of destination for BIs at time of admission and compared it to the actual province of residence in 2010^{Footnote 52}. Of the federal BIs who filed a tax report in 2010, the majority indicated at time of admission that they were intending to settle in British Columbia (44%) and Ontario (40.8%). In 2010, the portrait was similar, with 46.8% actually residing in British Columbia, 41.4% in Ontario and only 12% residing in other provinces or territories (Table 5.19).

Similarly, the distribution of the province of intended destination of FSWs and PNs remained relatively similar when comparing it to their respective distributions for the province of residence in 2010. Most of the FSWs were residing in Ontario (63%) or in British Columbia in 2010 (19.6%), while PNs were more spread around the country, with Manitoba and Saskatchewan hosting a significant share of them (46.8%). When comparing with the Quebec BIs, the situation was somewhat different. 47.3% of them had indicated, at time of admission, Quebec as their province of intended destination; 33.3% reported British Columbia and 17.6% reported Ontario as intended destination. Of all immigrants admitted between 1995 and 2010, only 16% of the BIs selected by Quebec were residing in that province, as reported in the 2010 income tax report, while the majority were established in British Columbia (50.7%) and Ontario (30.1%). As such, inter-provincial mobility was highest for this group.

Dest.=Intended destination
Res.=Residence in 2010
Source: IMDB

Comparatively, federal BIs engaged in little interprovincial mobility; most (83.4%) of them were still residing in their province of intended destination, with no significant difference between the BI classes. This rate is similar to what is observed for the FSWP (82.1%) and PNP (85.3%) (Table 5.20).

Source: IMDB

Despite the structure of the funding formula for sharing the funds across provinces (which ensures smaller provinces/territories receive a somewhat larger amount of the federal IIP funds than would occur based on single demographic or economic criteria), Ontario and British Columbia still receive the biggest share of the investment funds as indicated earlier in this section (i.e., 41.9% of the federal funds go to Ontario and 14.3% to British Columbia). These two provinces also benefit the most from the business and job creation by immigrants admitted under the EN program or through the other business classes, as they receive the biggest share of these immigrants. As a result, the provincial distribution of federal BIs indicates that although BIs settle across the country, Ontario and British Columbia are the two provinces that benefit the most from the program.

5.2.2. Out-migration

A study undertaken by CIC looked at out-migration^{Footnote 53} of immigrants admitted between 1995 and 2009^{Footnote 54}, using IMDB data. This analysis allows comparisons between out-migration rate of ENs, INs, SEs, FSWs and PNs.

It shows that the different classes of BIs have similar out-migration rates in the first 5 years, although INs have lower out-migration rates in the first and third years after admission (1.4% and 4.2% after one and three years in Canada) when compared to ENs and SEs (2.1% for ENs and 2.2% for SEs after one year; 5.2% for ENs and 5.1% for SEs after 3 years), after which they start to surpass both of the remaining BI classes (10% for INs versus 9.0% for ENs and 9.1% for SEs after 5 years). After 10 years, INs out-migration rate is substantially higher than that of other BI classes (26.2% for INs versus 19.8% for ENs and 18.2% for SEs), surpassing them by over 6 percentage points (Table 5.21).

Source: IMDB

Results from this study also indicate that BIs have slightly lower out-migration rates than FSWs in the first three years following admission. However, after five years in Canada, rates are similar between BIs and FSWs, and after 10 years INs have the highest out-migration rate of all economic classes (26.2%), while ENs, SEs and FSWs out-migration rate remained below 20%. In comparison, out-migration rates of PNs are substantially lower; after 10 years following admission, only 5.3% of the PNs have left Canada.

The increasing rates of out-migration after five years (especially for INs) may indicate a relationship with obtaining citizenship (that is, that a share of these immigrants wait to obtain Canadian citizenship to move out of the country). As indicated by key informants when asked about program issues (further discussed in the next sub-section) as well as in a report from the Migration Policy Institute^{Footnote 55}, BIs (and especially INs) use the program to obtain citizenship, as an insurance policy in the case of political or economic uncertainty in their home country, without having the intention to reside in Canada. Provincial nominees have the lowest out-migration rates, not reaching 5% for all years since arrival available for the analysis.

5.3. Unintended Impacts

Although an open ended-question was asked to identify any unintended impacts of the BIP, two types of program issues were frequently identified by key informants and case study interviewees.

The first area where interviewees perceived program issues relates to residency in Canada. Interviewees indicated that some PAs admitted as BIs use the program to obtain permanent residency (and eventually citizenship) for two main purposes: to establish their families permanently in Canada and to have an insurance policy to keep their options open in the case of political or economic uncertainty at home. As such, many PAs would still be residing and maintaining their activities abroad, while at the same time benefitting from Canadian services, without making significant contributions to the country.

The other area where program issues was identified by interviewees revolves around the settlement of a large number of Quebec-selected investors in P/Ts outside of Quebec. Although this issue is not about the federal BIP per se, it has impacts on the federal program. The first is on the levels allocation available for federal BIs. Where an immigrant selected by Quebec settles in a province outside of Quebec, they take a space allocated for a federal business immigrant, thereby decreasing the number of federal business immigrants that can be admitted within the levels set by parliament. Over the long term, this has an impact on the federal IIP funds available to participating P/Ts, resulting from decreased admissions available for federal BIP admissions.

Additionally, other issues related to the federal BIP were mentioned by a few interviewees. They relate to the falsification of documents and difficulties with verifying documents (including the provenance of funds), ‘business flipping’, and that because BIs are unevenly distributed across Canada, impacts of the program could be more concentrated in some areas of Canada than others.

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