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NS Founders Campaign For Better Tax Credit

A campaign is afoot to persuade the Nova Scotia government to increase its incentives for private investment in the fastest-growing segment of the economy.

The digital and startup communities in Nova Scotia want the Finance Department to liberalize Equity Tax Credits for high-growth companies, including startups.

Any column discussing both taxation and technology is bound to lose readers pronto, but this is why you should read on.

The biggest single problem facing the Nova Scotia economy is slow growth — our gross domestic product rarely grows by more than one per cent, which limits opportunity, social programs, you name it. There’s a dire need for stronger economic growth, and the best solution is the patient nurturing of high-growth businesses headquartered in the province.

The fastest-growing companies we have are startups, locally owned businesses that develop technology into products for the global market. According to data collected by Entrevestor, Atlantic Canadian startups in 2013 increased revenue by 30 per cent and employment by a whopping 43 per cent. No other segment of the economy can boast those types of metrics.

Startups need equity investment to bring a product to market. That’s why most states and provinces offer tax credits to private investors who back startups. It means government is channelling capital into the most productive part of the economy and letting private investors decide what companies deserve the money.

Nova Scotia grants a 35 per cent tax credit to individuals investing as much as $50,000. Both the investor and target company have to be based in Nova Scotia. People in the tech community, led by GoInstant co-founder Jevon MacDonald, are pushing for more liberal rules, arguing the move for better tax credits is in keeping with the ethos of the Ivany commission. They want all members of their communitites to push for ETC liberalization during the current consultation conducted by Finance Minister Diana Whalen.

“The Ivany report has given us a powerful and daunting call to action: Nova Scotia must double the number of startups we are producing in the next five years,” MacDonald said in an email to members of the startup community.

“To deliver on that, there is one key ingredient we need, and it’s in short supply: risk capital.”

MacDonald, a member of the OneNS Coalition, also said recent reports by economist Donald Savoie, Laurel Broten (now the CEO of Nova Scotia Business Inc.), and venture capital specialist Gilles Duruflé all called for a liberalization of equity tax credits.

MacDonald wants the ceiling on eligible investments to rise at least to $250,000, the level offered by New Brunswick. He also wants the tax credit to apply to companies and trusts, as well as individuals, and to be granted for investments in startups across Atlantic Canada, not just Nova Scotia companies. The hope, obviously, is the other Atlantic provinces will follow that lead and there would be a region-wide tax credit.

He is asking members of the startup community to contact the Finance Department during its current review of the tax system and push for liberalization of the equity tax credit. Others are joining his campaign.

Last week, Ulrike Bahr-Gedalia, president and CEO of Digital Nova Scotia, put out a statement:

“We believe in the momentum of a collective voice with the startup community and call upon our industry members and stakeholders to add their support to the proposed revisions outlined by Jevon MacDonald.”

You can make submissions to the Finance Department at budget@gov.ns.ca.