CCI, NACO, CVCA, and AceTech respond to gov’t tax changes in joint letter

Canada flag

As the Canadian government closes its consultations on its proposed tax changes today, several CEOs have been public about their sentiment that the proposals would discourage angel investment and entrepreneurship.

Today, several business organizations have signed on to a joint statement denouncing the tax proposals. Released by the Council of Canadian Innovators, the letter is signed by OMERS Ventures CEO and CCI Vice-Chair John Ruffolo; CCI executive director Benjamin Bergen; CVCA CEO Mike Woollat; NACO CEO Yuri Navarro, AceTech CEO Jodi Kovitz; and AceTech Chair Mike Jaine.

“Many would pack up their business and relocate to a jurisdiction with a more desirable tax structure, most notably the US.”

CCI says it engaged with over 90 Canadian CEOs and VCs, angel investors, and tax experts over the summer to collect responses on the potential impact of the changes.

“Weakening Canada’s capital markets will lead to a higher level of dependency on traditional mechanisms of financing through high-interest loans and increased reliance on government to provide more subsidies and grant programs,” the letter reads.

CCI summarized the concerns into three buckets: the changes would affect access to capital in Canada, investments would be slower and result in a brain drain, and Canada’s innovation economy would decelerate.

“If these tax proposals were implemented, many would pack up their business and relocate to a jurisdiction with a more desirable tax structure, most notably the US,” the letter reads. “Without a significant concentration of successful domestic scale-ups in Canada, we will experience a further decline in our innovation outputs and quickly turn into a branch plant economy, having to compete globally by lowering our skilled labour wages,” the letter reads.

NACO, which represents 3,300 Canadian angels, and the CVCA, which represents over 260 firms, also submitted open letters on behalf of their members.

NACO’s data showed that up to 88 percent of investors use private corporations (CCPCs or VCCs) to deploy all of some of their investments into startups, with only 12 percent of respondents exclusively investing directly as individuals. The organization urged the government to consider the relationship of family members as first investors in new businesses, and specifically target individuals who are withdrawing salaries from businesses instead of those that are investing risk capital into a company.

“Angel investors are frequently former or current entrepreneurs, or business professionals, and act as a primary source of financing, mentorship and access to networks for Canadian startups,” NACO said in its letter.

CVCA said that capital could leave Canada as investors seek out more tax competitive environments, and affect international competitiveness on Canadian investments.

View the CCI’s letter below:

Jessica Galang

Jessica Galang

Freelance tech writer. Former BetaKit News Editor.