Thank you, Mr. Chairman. Thanks for the opportunity to address an important economic development issue for Atlantic Canada.
I would like to request that the federal government increase the tax credit limit so that a purchase size of $10,000 would maximize the tax credit limit for investors in the GrowthWorks Atlantic venture fund. Atlantic Canada has a growing need for increased venture capital to be raised and invested in this region. While we have 8% of the population of Canada, we have less than 2% of the venture capital assets under management available to our entrepreneurs; $1.2 billion leaves this region annually during RRSP season, and for the most part, those funds are managed and invested outside Atlantic Canada. Our young people are receiving outstanding educations at our universities and community colleges, which have great reputations, but then they are forced to leave for job opportunities elsewhere, particularly in western Canada. We need to provide greater economic opportunities both to keep our young people here at home and to draw back those who have already left. Fostering more venture capital in the region is one of the best and most effective ways of doing this.
GrowthWorks Atlantic venture fund was started in January 2005 and is truly an Atlantic Canadian initiative. We raise all our funds from residents here in Atlantic Canada and we invest exclusively in businesses located here in the region. The fund has local management, has a local board of directors, and we have offices in Halifax, Fredericton, and here in St. John's. We have broad support from the governments of Nova Scotia, New Brunswick, and Newfoundland and Labrador, and all four provincial federations of labour serve as the fund's sponsors. We have $28 million in assets and we currently have 12 companies in our portfolio. We are committed to investing in entrepreneurial Atlantic Canadian companies, helping to grow and diversify the economy and provide jobs here at home.
To increase the amount of venture capital raised and invested in Atlantic Canada, the tax credit limit for GrowthWorks Atlantic venture fund should be increased from a purchase size of $5,000 to $10,000. Since the program was established in 1985 nationally, there has been no increase in the purchase size to maximize tax credits for investors. The RRSP contribution limit, however, has increased from $5,500 in 1985 to $15,500 today and will increase to $18,500 in two years. Part of the problem with the $5,000 maximum tax credit purchase size is the compensation grids brokerage firms now use to pay investment advisers. A recent survey, which we just had done, of 200 investment advisers across all four Atlantic provinces revealed a common complaint for advisers who are not selling the fund due to the small ticket size. There have been changes in recent years to these grids that now result in advisers getting paid up to 75% less on a $5,000 purchase compared to a $10,000 mutual fund purchase. A number of the large investment dealers are also proposing to remove purchases under $10,000 from the compensation grid completely, effectively cutting off any source of income to the adviser for the purchase of our fund.
We are concerned that if the tax credit is not increased to apply to a purchase size of $10,000, the amount we are able to raise and therefore invest in Atlantic Canada may effectively be cut off. By increasing the tax credit limit on the maximum purchase size for our fund, we will be able to raise larger amounts of capital for investment in Atlantic Canada, enhancing the economy and providing more and better job opportunities in the region. We estimate the cost to the federal treasury to be approximately $20 million, due largely to sales caps that are in place across the country, with the exception of Ontario and here in Atlantic Canada. If Ontario dramatically increased in sales--something we don't think will happen--a cap could always be instituted there as well.
We would be happy to work with Department of Finance officials on studying this issue. By encouraging and raising the investment of venture capital here at home, in Atlantic Canada, we can provide economic growth and better job opportunities for the entrepreneurs in our region. To ensure that the capital is raised here, we need to have an increase in the tax credit limit to a maximum purchase size of $10,000, so that advisers are not discouraged from selling our fund to their clients, and so that we can continue to raise money for investment in the Atlantic provinces.
Thank you.