Canada’s Internet economy received an A- on its final report card from the Canadian E-Business Opportunities Roundtable on Monday, but there remains room for improvement.

In its third and final report, “”Fast Forward 3.0:

Maintaining the Momentum,”” the Roundtable concludes a number of its recommendations have influenced public policy. David Pecaut, CEO of iFormation Group and Roundtable chair, says the tax and regulatory environment is a good example.

“”We really changed the government tax environment around early-stage businesses,”” Pecaut says. “”The dramatic reduction in capital gains taxes, the change in stock options treatment, the capital gains rollover for angel investors — all of these things together have more than leveled the playing field with the U.S. in early stage financing ventures.””

The federal capital gains inclusion rate fell from 75 per cent in 2000 to 50 per cent in 2001.

Pecaut says the Roundtable also managed to help change foreign venture capital regulations. Foreign investors can now invest in Canadian venture funds without being deemed residents in Canada, and subsequently being subject to taxation, he says. They are now in a position to invest more aggressively.

Pecaut also mentioned the increase in pension fund investment and the federal government’s Web presence as important milestones.

“”We were concerned about Government On-Line. It’s starting to pick up,”” Pecaut says. “”The federal government has committed $600 million in the fall budget, and they set up a private sector advisory committee to help guide some of those speeding decisions.””

As the grade indicates, things can still improve. Pecaut says there are three immediate challenges. First, small and medium businesses (SMBs) continue to lag their U.S. counterparts in using the Internet as more than a company Web site. They need to start buying and selling online and using it as part of their operations. Second, while the venture capital has increased significantly relative to the U.S., “”our pension funds haven’t come to the party to any great degree yet, certainly not compared to U.S. pension funds.”” Third, Canada has to become a strong brand international.

These tasks will fall in part to the Canadian e-Business Initiative, a private and public sector effort to address e-business. Pecaut says he expects the group to focus on turning Canada into an international brand and improving e-business adoption in the SMB space.

The Roundtable was scheduled to present Fast Forward 3.0 at a gala in Ottawa Monday night.


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