IMPROVING ACCESS TO SMALL BUSINESS VENTURE CAPITAL (2004)

 

BC has become a leader in Canada in improving access to venture capital for small business through the “Small Business Venture Capital Act” (SBVCA).  Venture capital, in this context, describes private or public investment in start-up or early-stage companies.  In an attempt to mobilize private capital, governments have in the past given tax incentives to persons investing in qualifying businesses. These incentives have played an important part in invigorating the provincial economy.

 

Under  the SBVA (Section 29.1, 1)  the Lieutenant Governor may prescribe, for any year, an amount to be known as the annual maximum venture capital tax credit. The annual maximum venture capital incentive is currently set at a total of $20,000,000, which is distributed as follows:

 

·  $12,000,000 is available to any eligible business in BC.

·  $3,000,000 is available for investments in BC outside of Greater Vancouver and Victoria.

·  $5,000,000 is available for investments in BC in the commercial exploitation of interactive digital media product.

 

The current incentives allow for a 30% tax credit on monies invested in qualifying companies.  The effect of the maximum therefore is to limit the funds invested, with incentives, into Venture Capital Corporations and Eligible Business Corporations to $66,666,667 in any one year.

 

At the end of February 2004, several eligible businesses were advised that their applications for investment certificates (that would allow their investors to take advantage of the SBVCA incentives) had been declined. Although these businesses were advised that their applications would be carried over into the 2004 tax year, this overrun nevertheless demonstrates three things:

 

·  The business investment climate in BC has picked up considerably.

·  An increase in the amount prescribed as the annual maximum venture capital incentive would be appropriate at this time.

·  The financing plans of several eligible businesses were disrupted or had to be curtailed due to this decision.

 

THE CHAMBER RECOMMENDS

 

That the provincial government:

 

1. increase the budget for the annual maximum venture capital incentive by an amount equal to the total amount requested for 2003; and

 

2. increase the budget for the annual maximum venture capital incentive for investments outside of Greater Vancouver and Victoria to ensure these areas receive their proportionate share.