C HAPTER 10
S U M M A R Y The following is a summary of the NAO’s recommendation that the Canadian Ministry of Finance establish an Innovation and Productivity Tax Credit (“IPTC”) for Canadian small business.
RECOMMENDATION For the past 30 years, there has been a fundamental change in the drivers of the Canadian economy from natural resources to technology and innovation. Some 85% of Canada’s GDP is presently being generated by small and T HE I NNOVATION AND P RODUCTIVITY T AX C REDIT – A R ECOMMENDATION FOR C ANADA
A full copy of the paper is available at
http://www.angelinvestor.ca/ library/docs/NAOWhitePape FinalFeb2004.pdf .
medium-sized enterprises (SMEs). They are without dispute this country’s economic engine. The launch of an overwhelming number of SMEs has depended upon capital invested by angel investors who assume significant risk in funding these emerging Canadian companies and nurturing their success. As integral components of the success of SMEs and the economic health of our communities, there is public policy value in further encouraging angel investments in Canadian SMEs. Nevertheless, the current tax regime provides little recognition of the risks assumed by angels and does not provide maximum incentive for continued investment and risk-taking by angel investors in Canadian SMEs. To recognize and encourage investment in Canadian SMEs and reap potential benefits of employment and community prosperity, we recommend federal and provincial governments provide qualified and eligible investors (individual and corporate) with a combined 30% Innovation and Productivity Tax Credit (IPTC). We recommend the IPTC be provided for investments in an Eligible Business Corporation (“EBC”) thus dramatically increasing funding for these ventures. ( The IPTC program should be modeled after an existing program that is working effectively in the province of British Columbia.) DISCUSSION AND SUPPORT Federal and provincial economic policymakers alike recognize the need to encourage innovation in order to ensure economic growth and prosperity. Canada has an abundance of seed and start-up business development opportunities, based on technology and innovation. Net new economic growth is generated primarily by SMEs. It’s imperative that Canada’s policymakers support and encourage angel investment in our emerging enterprises. Policies that allow emerging enterprises to capitalize on the management and financial resources provided by angel investors improve the likelihood that such companies will succeed, leading to more jobs and long-term economic strength.
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