CVCA Responds to Consultation on Proposed Private Corporation Tax Changes
Since the July 18th announcement, the CVCA has engaged its members and others in the ecosystem to assess the impact of the proposals. Overall, while members feel all of the proposed tax changes will be harmful to investment, savings, growth, innovation, entrepreneurship, and job creation, the proposals centering on substantially increasing the tax on passive investment income is seen as having the biggest negative impact.
In a recent survey conducted by the CVCA, 81% say the proposed tax changes will have a very negative impact on the Canadian innovation ecosystem. Other survey findings conclude:
- Over 80% are extremely concerned about the impact this would have on venture capital and private equity
- 94% are concerned about the impact on investment
- 94% see it having a negative impact on fundraising
When asked what impact there might be on their firms’ annual investment level, nearly 60% said it could reduce by 20% or more.
In its formal submission to Canada’s Minister of Finance, the CVCA outlines how the changes would negatively impact the Canadian private investment ecosystem. The submission also provides sample calculations to demonstrate that the net returns and the availability of capital for both venture capital and private equity could be substantially impacted.
The concerns outlined and the impacts highlighted signify that the industry and government must work together and take the necessary time to achieve tax reform that won’t impede investment at precisely the time efforts are underway to ensure that investment in the Canadian economy continues to grow. This government has demonstrated an openness toward listening to our concerns and the CVCA looks forward to working towards a solution that ensures these measures have no impact on investment in venture capital and private equity, and ultimately on the funding of innovation, growth, and job creation.
The government’s stated goal is to position Canada as a world leader for investment to create well-paying jobs and improve the lives of middle class Canadians. The CVCA stands ready to work alongside government to help make this happen.
About the CVCA and our members
The Canadian Venture Capital and Private Equity Association (CVCA) is the voice of Canada’s venture capital and private equity industry. We represent over 260 firms and thousands of individuals across the country who invest in Canadian innovation and growth. In addition to providing financing, CVCA members bring leadership, mentoring, talent management, connections and advice to growing Canadian companies at all stages and in all sectors. CVCA Members also manage investments from a significant portion of union and non-union Canadian pension plans to help ensure retirement security for the vast majority of Canadians.
Well over $100 billion of venture capital and private equity has been invested in the Canadian economy over the past decade.
In 2016 alone, $3.2 billion in venture capital was invested in 530 innovation companies from seed to late stage funding, across information communication and technology, health and life sciences, clean tech and agriculture technologies, creating thousands of highly-skilled jobs and helping put Canadian innovation on the global stage.
Over that same period, private equity provided $13.7 billion of growth financing toward 536 Canadian companies across a wide range of sectors including oil and gas, automotive, mining, clean technology, information technology, manufacturing, retail and infrastructure.
View the CVCA Submission to Minister of Finance Regarding Proposed Private Corporation Tax Changes here.
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