The Ontario Liberals' election platform contains a section devoted to creating jobs in the innovation sector, but few details are been provided. Typical for an election document, you would think.
But it turns out that there is real substance behind this mission. Although this isn't formally laid out in the platform, the Ontario Liberals are looking to introduce major tax credits for angel investors and institutions who invest in startups.
Details for such an initiative are still being finalized, but the Liberals are considering a 35 per cent tax credit for both angel investors and institutions who invest in startups. That means for every $100 invested, the angel or institution would get $35 back from the government, effectively hedging losses up to 35 per cent of invested capital.
The sectors eligible for this tax credit include technology, media, telecom, clean tech and life sciences, and companies who hope to offer their investors this tax break would have to be pre-approved by the government.
Such big tax breaks probably won't do much to sway public opinion during the election, because most voters don't even know what venture capital is, so that likely isn't the reason that the current government wants to introduce such a bold plan. Instead, it looks like Dalton McGuinty's government truly cares about developing an innovation-based economy, in part because manufacturing has created the province's current woes, and in part because venture capital is important for the province's economic future.
Venture capital has all but died in this country, and some of the most respected names in the space have been ringing the alarm lately. While they clearly have a self-interest in bringing the sector back, because they make fees from investing in startups, they say that they're speaking out because they care about the country's future. Without venture capital, tech darlings such as Research In Motion and Open Text would have never gotten off the ground years ago.
However, the tax credits are bound to face some opposition. Starting in the late 1990s, the Ontario government supported labour sponsored investment funds, which gave individuals/retail investors tax credits for investing in startups. That seemed like a good move during the tech bubble, but when it burst a lot of people lost a lot of money, and the government ultimately killed the initiative. To prevent retail investors from getting hurt again, it looks like the proposed tax credits will only be applicable to venerable institutions and accredited angel investors.
