Stimulating small-business creation and growth should be a key focus of Canada’s plans to move out of austerity and drive the economy, business owners and advocates said on the eve of the federal budget.
In January, Prime Minister Stephen Harper said he wanted to get the views of “entrepreneurs, workers, small businesses and ordinary hard-working Canadians” before finalizing the document. Leading up to its release on Thursday, the Conservative government is branding its Economic Action Plan 2012 as an exercise in building jobs, growth and long-term prosperity. A senior government official has included “supporting entrepreneurship, innovation and world-class research” in a list of the budget’s five priorities.
Sources told The Globe and Mail on Wednesday that Ottawa will extend by another year a temporary hiring credit for small and medium-sized business that will defray their cost of employing more people. The measure will provide a credit of up to $1,000 against the increased employment insurance premiums a small firm would have to pay as a result of hiring new staff. The credit means a firm could take on two or three new employees without incurring additional EI costs.
Minister of State for Science and Technology Gary Goodyear has said there will also be a “transformative” change to the way Ottawa spends nearly $7-billion in R&D funds. But he’s cagey about whether it’s more than just a shuffling of current budgets.
The federal government plans to replace the immigrant entrepreneur program it shelved in 2011, with a new system aimed at identifying and speeding the path for “high-value innovators,” but not until the end of this year. And the head of the Canadian Federation of Independent Business (CFIB), Catherine Swift, said there will be an announcement soon about reductions in red tape, but it would be post-budget.
Entrepreneurs and small businesses are a growth engine of the Canadian economy, said the co-founder of non-profit advocacy group Startup Canada, Victoria Lennox, who is in Ottawa as part of a cross-country tour to meet with aspiring entrepreneurs. “There are more than one million small businesses that employ 48 per cent of Canada’s total work force, account for 25 per cent of total exports, and provide 30 per cent of our total GDP. Of those small businesses, 4.7 per cent are classified as high-growth enterprises and are responsible for 45 per cent of new job creation in Canada.”
The federal government needs to take a stronger lead in co-ordinating startup programs, Ms. Lennox added. “In Canada we’re fortunate to have many organizations that provide advice and support for entrepreneurs, but the ecosystem is very fragmented, so people don’t know where to go and when. We need to develop a collective vision and strategy.”
Startup Canada was formed last fall because even though Ottawa declared 2011 the “year of the entrepreneur,” very little changed in terms of new business development, Ms. Lennox said. “We see the need to move things along faster.”
The group, which is not affiliated with government, is travelling the country to collect recommendations to present to Ottawa in the fall, Ms. Lennox said. She would like to see more support for small-business owners and the investors who back them. A similar U.S. group, Startup America, was announced last year by President Barack Obama, whose government initiative offers entrepreneurs funding through sponsors, including the Ewing Marion Kauffman Foundation and The Case Foundation.
Yafa Sakkejha, a partner at Toronto-based health benefit group Beneplan Co-operative, has similar aims. “I’d like to see the government get involved in providing venture capital at a lower interest payment than is available from private companies,” she said. “The money that successful businesses pay back to the government can create a sustainable pool of money they can reinvest. Venture capital is looking to make a profit and the terms can be really harsh and require hiring a lawyer.”
More access to entrepreneurial education and stronger co-ordination and partnerships with the provinces and industry will help stimulate business development, said Canadian Youth Business Foundation CEO Vivian Prokop. “There are a lot off efforts that celebrate entrepreneurship,” she explained, “but there’s a difference between celebrating and actually creating startups.
“The good news is that Canada ranks very well in studies of how countries support entrepreneurship. When I go to international events on entrepreneurship I have people coming up to me and saying ‘if only we had what Canada has.’”
Ms. Prokop also points out it’s not necessarily a bad thing to step back, analyze small-business programs that are currently in place, and “ask what are we keeping, what are we changing and what are we going to divest of to make sure that taxpayers’ dollars are used in the most positive way.”
One thing that may not be in the federal budget, but is on the radar, is an effort to reduce the red tape involved in starting and operating a small business, said CFIB’s Ms. Swift, who will also be in Ottawa for the budget. “We’ve been told that a separate announcement on reducing bureaucracy and duplication will be made within a few weeks after the budget,” by Treasury Board President Tony Clement.
Another item CFIB had lobbied for is an indexing of the capital gains exemption for owners selling their businesses.
The Conservative platform for the 2008 election included indexing it to inflation, but the exemption hasn’t been raised since it went up to $750,000 in 2007, Ms. Swift said. “It should probably be up over $800,000 by now.”