Canadian Entrepreneurs Voice Concerns Over 2024 Budget

Survey | May 3, 2024

Image: MaRS Canada’s Budget 2024, Founders Perspective Capital Gains Tax

Canadian Founders Voice Concerns and Call for Supportive Policies in Wake of Budget 2024

The release of Canada’s Budget 2024 has ignited strong reactions from the nation’s entrepreneurial sector, particularly regarding changes in capital gains tax and the broader implications for startup growth and innovation. In response, a comprehensive survey conducted by MaRS, Invest Ottawa, and Communitech has brought forward the perspectives of over 150 founders and CEOs, revealing a community eager for change and supportive policies that can bolster Canada’s status as a competitive tech hub.

New Tax Policies Will Stifle Innovation and Investment

One of the standout concerns from the survey is the modification to capital gains tax, which many respondents believe could stifle the entrepreneurial spirit that drives innovation. Nearly 60% of the founders expressed that the new tax policies would deter innovation and investment, with 21.9% fearing it would hamper job creation and talent recruitment.

See:  Canada’s Capital Gains Tax Changes Sparks Economic Debate

The sentiment is that these changes may force many to look outside Canada for better incentives, with a significant number contemplating moving their operations to more favorable environments like the United States.

“I expect less Canadian investors [in my company] with most new investors being from the U.S. This will slowly lead to ownership change in the corporation. Furthermore, Company investments will mostly be in the USA.”

“My focus will be on non-Canadian [capital] sources and therefore moving will more likely be necessary.”

“All my subsequent business will be built outside of Canada.”

“After 11 years of very hard work… I’m done with being treated like a greedy bastard instead of a creator of high paying jobs.”

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The Need for a Nurturing Ecosystem

Image: MaRSk/Communitech/Invest Ottawa: Budget 2024 Founder perspective, What would help entrepreneurs

The survey results underscore a critical need for a more nurturing business environment in Canada. Entrepreneurs are calling for policies that not only support innovation from a financial aspect but also through reduced bureaucratic hurdles and enhanced government procurement processes that favor home-grown companies. Suggestions from the community include:

• Aligning Canadian tax policies more closely with those of the U.S., especially the Qualified Small Business Stock (QSBS) system, to create a more favorable investment climate.
• Implementing tax credits to incentivize investments in Canadian innovation and extending favorable capital gains tax rates to all tech industry workers, not just executives.
• Reducing bureaucratic barriers and simplifying the government procurement process to better support startups (‘first customer’).

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Despite the challenges, Canadian entrepreneurs remain committed to fostering economic growth and job creation. However, they emphasize the necessity for the government to partner effectively with the private sector to create conditions that can sustain the growth of tech companies in Canada. This includes considering the broader economic goals of the nation and integrating entrepreneurial needs into policy making effectively.

Decline in Productivity and Entrepreneurship

From coast to coast, Canadian insolvencies are up.  In Ontario for example, corporate insolvencies are up 221% year over year. The survey also touches on the broader economic impact of declining entrepreneurship, highlighting the correlation with Canada’s falling productivity rates and standard of living. The data shows a clear decline in the number of self-employed Canadians with employees since 2000, indicating a lessening appeal of entrepreneurship in the current economic and policy environment.

Image: MaRS/Communitech/Invest Ottawa: Budget 2024 Founder perspective – Insolvencies Up, Total Self Employed down

Conclusion

It’s clear that times are tough but especially for Canadian founders and entrepreneurs.  For Canada to maintain and enhance its competitiveness on the global stage, supportive, clear, and beneficial policies are essential for economic growth, value capture and the survival of vibrant entrepreneurial ecosystem.

The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada’s Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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• Source: https://ncfacanada.org/canadian-entrepreneurs-voice-concerns-over-2024-budget/