Appendix A: (Continued)
Israel:
Israel’s angel investor tax credit regime, which provides 33% relief on qualified investments and targeted capital gains exemptions, has played a central role in deepening early-stage capital pools and increasing institutional participation in high- tech sectors. Notably, this policy helped create a self-reinforcing cycle of domestic capital recycling with exited founders becoming repeat investors. Combined with government co- investment through the Israel Innovation Authority, these incentives have helped drive Israel’s R&D intensity to over 4.9% of GDP—the highest in the OECD.
Estonia:
Estonia applies a 0% corporate tax on reinvested profits, incentivizing long-term capital retention and recycling within the innovation economy. This policy is not just pro-growth —it is structurally reinvestment-oriented, encouraging companies to channel earnings into R&D, hiring, and expansion rather than distributing them as dividends. Paired with Estonia’s digital-first infrastructure, this has created one of the most entrepreneur- and investor-friendly environments in the world. Startups can incorporate in less than a day, compliance is automated, and capital flows are transparent—reducing friction for both domestic and foreign investors. The impact is evident: Estonia has achieved €1,056 in venture capital per capita, more than seven times the European average, and has produced globally scaled firms such as Bolt, Wise, and Veriff. The OECD recognizes Estonia’s tax structure as a best-in-class example of how fiscal design can drive sustained private investment and capital recycling. Estonia’s approach also fosters a strong culture of founder reinvestment and ecosystem retention. Exited entrepreneurs frequently become angel investors and mentors, with tax policy reinforcing—not penalizing—this compounding effect. For Canada, this model offers a powerful precedent: tax incentives that reward behavioural reinvestment—such as the proposed Strategic Capital Gains Deferral (SCGD)—can be instrumental in building a self-reinforcing innovation ecosystem.
51
Powered by FlippingBook