Canada lags behind U.S. in supporting small businesses

by Christine Wong

We Canadians tend to get our backs up when people assume we’re exactly the same as Americans, but with different accents, eh?

For proof of just how different we are, take a look at how the two countries are using legislation to support startups.

Christine Wong

In the U.S., President Barack Obama is making his Startup America initiative a centerpiece of his campaign. Hit with charges that he hasn’t done enough to get the U.S. out of its economic sinkhole, he’s flogging the following legislative changes under the Startup America banner in the hope of winning a second term:

Crowdfunding: National securities laws would be changed to allow startups to raise equity capital through high volumes of private investors via online social networks without filing IPO papers with the U.S. Securities and Exchange Commission (SEC).

IPOs: Right now American startups are permitted to raise up to $5 million per year without filing an SEC prospectus; that ceiling would be raised to $50 million per year.

Immigration: The Startup Visa bill would make it easier for foreign students graduating from U.S. tech programs to stay in the U.S. and set up businesses if they meet certain conditions. For example, an immigrant entrepreneur can qualify for a special Startup Visa if their U.S. startup has made at least $100,000 in U.S. sales after one year. After two years, the startup must have created three new U.S. jobs and have either generated at least $100,000 in annual revenue or raised at least $100,000 in financing.

Tax breaks: Currently U.S. entrepreneurs can deduct $5,000 in annual startup-related business expenses from their taxes for the first year of operations. Obama wants Congress to double the level to $10,000 per year.

What are Canadian legislators doing to pave the way for IT entrepreneurs here? Well, a heck of a lot less.

The most proactive pocket in Canada may be British Columbia. Under its Investment Tax Credit Program, B.C. angel investors can directly invest up to $200,000 per year in an approved startup business in exchange for a 30 per cent refundable tax credit. The provincial government budgets $30 million for the program annually, which means $100 million of startup capital can be raised each year using the tax credits. The program was launched 10 years ago and has raised over half a billion (that’s billion with a B) from private investors for eligible startups in B.C.

But only entrepreneurs in B.C. can take advantage of that initiative, something the Toronto-based National Angel Capital Organization has been lobbying to change. It wants Ottawa to set up a program modeled on the B.C. system so that a 15 per cent federal tax credit is matched by another 15 per cent credit in each province. In Ontario, the Liberals floated a plan during the last provincial election to introduce a 35 per cent angel tax credit for investors supporting tech startups. Although Dalton McGuinty’s Liberals were re-elected we haven’t heard much about the proposal since then.

There is some momentum on Canada’s crowdfunding frontier. The Canadian Advanced Technology Alliance wants Ottawa to make legislative changes similar to Obama’s crowdfunding bill so Canadian startups won’t be left behind their U.S. counterparts on the fundraising scene.

But really, that’s pretty much all that’s going on here north of the border: an Ontario election promise and a crowdfunding rallying cry from a tech lobby group. Can’t we do more in Canada, especially from a government point of view?

I’m not saying the Startup America bills are a cure-all. But they’re certainly something Canada can look to for inspiration. Can’t we find some legislative ways to be cautiously, politely Canadian and still support our startups?

Christine Wong
Christine Wong
Christine Wong has been an on-air reporter for a national daily show on Rogers TV and at High Tech TV, a weekly news magazine on CTV's Ottawa affiliate. She was also an associate producer at Report On Business Television (now called BNN) and CBC's The Hour With George Stroumboulopoulos. As an associate producer at Slice TV, she helped launch two national daily talk shows, The Mom Show and Three Takes. Recently, she was a Staff Writer at and is now a freelance contributor.

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