It’s difficult to get political parties to agree on anything leading into an election but New Brunswick’s three largest parties are very close together regarding the encouragement of more private investment in small and medium size business. There are differing approaches, but the fundamental idea is driving policy; increase private sector investment in local business.
It’s something politicians throughout the Atlantic region should be emulating. New Brunswick has led the way on the growth of the Small Business Investor Tax Credit as a vehicle for entrepreneurs to access capital. The program provides incentives to private investors to keep their capital closer to home by investing in local business. It’s a pretty simple premise, direct investment in a business provides a direct tax benefit of between 15% to 30% of the investment, depending on eligibility criteria.
The movement to improve access to private capital has been primarily championed by groups involved with growing tech start-ups but the program isn’t and shouldn’t be sector specific. It’s been used effectively by many small business of all sorts looking for infusions of capital from friends, relatives or business partners either at onset of business or during rough patches in their earlier days.
Equity tax credits are designed to attract private capital back into the region. Private investors bring with them important due diligence and oversight for a young businesses looking to get off the ground. While similar equity tax credit programs are available for individuals in all four Atlantic Provinces, New Brunswick has taken the lead by increasing the allowable investment levels and opening up opportunities for not only individuals, but also trusts and corporations.
While New Brunswick is more bullish, Nova Scotia, Prince Edward Island and Newfoundland and Labrador have been much more tentative. The next phase of this should be to open up these investment opportunities regionally to increase the size of the pool of available capital.
It makes sense that an investor from Nova Scotia should benefit from investing in a small business in PEI as much as they would from investing in their home province. Why should a small business owner in Sackville, NB be restricted from accessing capital investment from a relative who lives 10 minutes down the road in Amherst?
Investments in small business don’t only benefit a specific community, increasing private investment benefits the entire region by stimulating economic activity.
With a population of a little more than 2 million, Atlantic Canada needs to allow not only a freer flow of goods and services, but a larger pool and freer flow of private capital. The question to be asked within finance departments should not be whether it’s a good idea to provide out-of-province investors with tax benefits but why would we restrict out-of-province investment in our home provinces?
There are large pools of private capital in Atlantic Canada invested elsewhere. The unfortunately side effect of this is, over time, private capital is now often seen only as a lever to access greater amounts of public funding through federal and provincial governments or their agencies. We should be working with the view to offset this reliance on public money with greater levels of private investment.
12 years ago, CFIB played an integral part in helping develop the NB Small Business Investor Tax Credit, thanks to the suggestion of a member. As the premiers meet to examine reduction of trade barriers and improve the flow of business, they should look to the example being set by New Brunswick’s leadership to encourage entrepreneurs through private sector investment and work toward breaking down regional barriers to the movement of capital.