Mr. Speaker, angel investors are high net worth individuals, usually with an entrepreneurial background, who make very early stage equity investments in small private companies.
The Conference Board of Canada’s Leaders Roundtable on Commercialization endorsed a proposal by the National Angel Organization, NAO, for an innovation and productivity tax credit, IPTC, that would provide a combined federal-provincial 30% tax credit, up to a maximum $250,000 credit, on such investments.
Based on estimates by the Canadian Angel Investment Network, which suggest that angel investors invest approximately $3 billion in Canadian businesses annually, a federal-only credit of 30% would cost $900 million per year.
Introducing such a credit would largely subsidize existing investments that would have occurred in the absence of the credit, thereby reducing the cost effectiveness of the proposed measure. The Government of Canada currently provides a number of generous tax incentives that benefit angel investors and to improve access to capital for small business, such as: a 50% inclusion rate for capital gains; the capital gains rollover for small business investments, whereby the tax on capital gains on small business shares is deferred to the extent that proceeds are reinvested in other small businesses; the $750,000 lifetime capital gains exemption for small business shares; and deductibility of capital losses on small business shares against all income sources.