Today, I appeared before the House of Commons Standing Committee on Finance as part of pre-budget consultations in advance of the 2018 federal budget. The Committee was in St. John’s Newfoundland, a province that has been struggling to gain economic momentum. Employment is down for the third consecutive year and the jobless rate now sits at a seven-year high. Promoting the growth of small businesses and encouraging entrepreneurs to start up business is a high priority not only in this region, but across Canada.
In my presentation to the Finance Committee, I called on the federal government to make positive proactive reforms to the tax system to promote equity investment in small private and public businesses. One of the IIAC’s key and long-standing recommendations is a Canadian version of the UK Enterprise Investment Scheme (EIS). This program provides a personal tax credit for the purchase of small business shares on a guarantor loan, an exemption from capital gains tax for shares held for more than three years, and a rollover provision exempting capital gains taxes on the sale of an asset, if the proceeds are reinvested in EIS shares. The EIS program has a solid track record of success because the investor’s own capital is at stake. Further, tax expenditures of the Program are more than offset by the revenues generated from corporate taxes, taxes paid on salaries to employees, and VAT paid by EIS-financed companies.
The IIAC’s pre-budget submission contains a number of other recommendations to improve Canada’s productivity and competitiveness, and achieve sustainable economic growth. You can access it here.