Finance Minister Bill Morneau says he’s heard loud and clear from the Canadian tech sector and that changes to his proposed tax reform will reflect its concerns and won’t impede future investment by venture capitalists and angel investors.

Morneau stopped in Waterloo Friday and met with a roundtable of technology leaders and CEOs at the Communitech Data Hub and then addressed the media, part of a week-long tour to address fears, and no small amount of controversy, sparked by last July’s announced tax changes.

The message to the tech community:

“We’re going to get [it] right.”

Flanked by Bardish Chagger, MP for Waterloo and the Minister of Small Business and Tourism, Morneau said “what I want to do today was make sure people understand that we will maintain incentives for people to be angel investors, helping startup businesses to get going.”

Specific details of what that would look like will unfold in coming weeks, Morneau said.

“What we’ve committed to is we’re going to take a step back and make sure that if we have venture capital and angel investing right now that’s working successfully at a certain quantum, then what we do is we work to make sure not only that quantum is fair but that we find a way to ensure over the long term that it gets enhanced.

“That’s our goal.

“So, we don’t have answers until we get the kind of input that we need.”

Morneau reiterated, “And we’ll get this right.”

Tech VC firms have warned that the government’s proposed changes will throttle future capital for startups.

The Globe and Mail reported earlier this month that a survey of members at the National Angel Capital Organization found that if the government went ahead with its tax changes as originally proposed, “three out of four respondents would cut their investment in startups, and nearly two-thirds would decrease investment ‘significantly’ because the proposed changes would increase taxation of so-called ‘passive investment income’ that angels invest through private corporations.”

Morneau said he’s aware of the concern and will take it into account as legislation is drafted.

“Today, what we were talking about in the private group [of investors] we were in before we came down here [to the press conference], was the critical importance that we maintain the ability for businesses to access capital from angel investors and venture capital investors.

“We know that in 2016 alone, over $3 billion of venture capital was invested in innovative companies, and hundreds of millions invested right here in Waterloo [Region]. Getting that right is going to be helpful here, but also across the country.

“So, what I can say here is what is good for Waterloo is good for the whole country.”

The proposed changes have generated concern, which Morneau himself acknowledged Friday, from a number of groups in recent weeks, including doctors, farmers, lawyers and small businesses.

The tech community fears stem from the fact that many angel investors invest in startups through their own private corporations. The proposed tax changes would hit those private corporations, reducing available funds.

The Liberal government has been an enthusiastic backer of the tech sector. In the last budget it announced a $950-million “supercluster” program and $400 million to boost funding for cleantech and AI initiatives.

About The Author

Craig Daniels
Senior Journalist

Craig Daniels is a veteran reporter, columnist and editor who has joined Communitech’s editorial team as senior journalist. He worked most recently at Postmedia in Hamilton, where he led the team that produced the National Post, and before that at the Globe and Mail, the Toronto Sun, Financial Post, the Montreal Daily News and the Telegraph-Journal in Saint John, N.B. He has an abiding interest in the transformational power and promise of tech and startup ecosystems, is a commercially licensed pilot, and has a debilitating wrist-watch fetish.