Canada\u2019s tax system needs an overhaul. In this series, The Globe and Mail explores the bold policy choices that would attract capital, boost investment and raise Canadian living standards for generations to come.<\/p>\n
Canada\u2019s tech sector is urging Ottawa to adopt new capital gains tax incentives that would encourage more investment into high-growth startups. <\/p>\n
In an open letter sent to Finance Minister Fran\u00e7ois-Philippe Champagne on Tuesday, a group of more than 100 businesses, industry groups and executives called for two specific changes to the existing federal tax regime. <\/p>\n
First, the letter said Ottawa should expand the Canadian Entrepreneurs\u2019 Incentive, which since 2024 has offered lower capital gains tax rates for startup founders.<\/p>\n
Second, the letter said entrepreneurs and investors should be allowed to defer capital gains on proceeds from selling a stake in a startup when that money is reinvested in another startup.<\/p>\n
\u201cFor someone who has successfully built or backed a Canadian company, that would create a stronger incentive to put the proceeds back to work rather than take them out of the growth economy,\u201d the letter said.<\/p>\n
\u201cThese policies should not be limited to the technology sector. Companies in advanced manufacturing, life sciences, mining and natural resources, and other innovative sectors face many of the same challenges.\u201d<\/p>\n
Opinion: To resist American domination, Canada must fix its failing tax system<\/a><\/p>\n The letter is part of a campaign from the Canadian Council of Innovators and the Canadian Venture Capital and Private Equity Association called Bet on Canada<\/a>. Some of the notable signatories include Maverix Private Equity founder and CCI vice chair John Ruffolo, Borrowell chief executive officer Andrew Graham, CVCA CEO Ben Bergen and KOHO Financial Inc. CEO Daniel Eberhard.<\/p>\n Prime Minister Mark Carney\u2019s recent Canada Investment Summit<\/a> was about attracting major institutional investors to the country, the CVCA\u2019s Mr. Bergen said in an interview. <\/p>\n \u201cBut this policy activates and mobilizes individual Canadians to participate in the economic investment opportunity that is in front of us right now.\u201d<\/p>\n Now is a good time to ask as the government prepares to table its next budget, he said. <\/p>\n \u201cAre we making sure that we are beginning to prepare the ground for the companies of the future?\u201d<\/p>\n Currently, the Canadian Entrepreneurs\u2019 Incentive offers lower tax rates for founding investors in a business on up to $2-million in capital gains. In order to be eligible, founders must own at least 10 per cent of a business that has been their principal employment for at least five years.<\/p>\n The letter proposes raising the cap to $15-million and broadening eligibility in order to better rival the U.S. Qualified Small Business Stock framework.<\/p>\n The QSBS deduction exempts all capital gains (up to either US$10-million or 10 times the initial investment, whichever is greater) made on investments in businesses with up to US$50-million in assets from federal taxes. Unlike the CEI, the QSBS does not differentiate between founders, investors and employees.<\/p>\n \u201cThese changes would make Canada more competitive with the United States,\u201d the letter said.<\/p>\n \u201cIt would also send an important signal about Canada\u2019s ambition: that we want the world\u2019s most ambitious entrepreneurs to build here, successful investors to keep putting capital to work here, and world-class talent to see Canada as a place where taking a risk can be rewarded.\u201d<\/p>\n Canada\u2019s tax system needs an overhaul. Here are 11 big ideas to make it happen<\/a><\/p>\n The country has long struggled to maintain a robust growth capital ecosystem<\/a> for domestic startups. The Senate committee on banking, commerce and the economy has spent the better part of 2026 studying the issue<\/a> and is planning to release a list of recommendations for the federal government to consider in the coming months.<\/p>\n Implementing a QSBS-style incentive system and allowing capital gains referrals for reinvested startup proceeds are among several dozen ideas presented to the committee by Canadian entrepreneurs, investors and executives.<\/p>\n \u201cMost investors who stand to benefit from this kind of incentive are not large institutional players, but ordinary Canadians,\u201d the letter said. \u201cAt its core, this is about rewarding the risk Canadians take when they invest in other Canadians.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Canada\u2019s tax system needs an overhaul. 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