“Albertaʼs challenge is to support a strong oil and gas industry and leverage the strength of this sector to broaden and diversify Albertaʼs economy”
Government of Alberta Strategic Plan 2011-2014.
With this important objective in mind, it is on behalf of a group of like-minded Albertans that we write to you, outlining the need for and benefits of a tax credit for investment in Alberta’s emerging technology companies.
The concept of a tax credit for technology investment in Alberta is not new and in fact has been repeatedly recommended and openly discussed by both government and private industry for a number of years.
In 2007, the Task Force on Value-Added and Technology Commercialization submitted its report to the Minister of Advanced Education and Technology, at that time, the Honourable Minister Doug Horner. This report highlighted that the “lack of access to investment capital is clearly the most formidable obstacle for emerging Alberta firms in the advanced technology industry,” and recommended that an investor tax credit be established to encourage Albertans to invest in such companies.
Since the report was tabled, numerous studies have been conducted in various jurisdictions, coming to the same conclusion: Innovative Canadian companies face real challenges in getting start-up funding and late stage risk capital financing.
“No major Canadian city puts less money into venture capital than Calgary, home to some of the country’s highest disposable incomes. Of a dozen global cities ranked by the Toronto Board of Trade, Calgary is last in Canada, with just $808 in venture capital spent per $1 million of municipal GDP.”
Globe and Mail March 2011
As a basis for comparison, San Francisco ranked 1st at $16,287 and Vancouver 7th at $1,799. Edmonton did not make this list.
Jurisdictions around the world are enjoying the benefits of technology tax credit policies. Results of the highly successful BC Venture Capital Program, offering a 30% tax credit, provide relevant insight.
- Tax credits of $256 million were leveraged into $2.3 billion of equity investment in early stage technology companies
- The BC government received $1.98 in taxes for every $1 of tax credit issued
- Every $1 combined federal provincial tax credit issued generated $2.92 in taxes
Hellman Schure Report 2010
While a tax credit for technology investment precludes the government from having to choose winners in highly dynamic, complex markets, it provides Albertans with opportunities to participate directly in the new economy through a free market mechanism. Expected benefits include:
- lncreased economic diversification of the Alberta economy
- Returns of 200% plus on public tax expenditures
- Accelerated commercialization of advanced technologies by Alberta companies
- New, knowledge based employment opportunities
- Fast, efficient access to capital by Alberta tech companies
- Growth in technology investment banking and Venture Capital formation
- A legacy of technology entrepreneurship through growth and spinoffs
- Significant “capital leverage” for companies raising money .
- Enhanced effectiveness of existing technology commercialization mechanisms
Premier Redford, the time to act is now. A progressive public policy will enable Albertans to meet the challenges and opportunities presented by both globalization and the technology revolution. We live in a world where innovation, education and talent are required more than ever, a world where Alberta is uniquely positioned to thrive — provided we support the emerging growth sectors of the 21st Century and incent risk-taking, enabling our companies and citizens to compete globally.
A such, we ask that you capitalize on this leadership opportunity and take the necessary steps to create a tax credit for technology investment as a means to increased diversification, innovation, economic performance and opportunities for all Albertans.
Pam Boytinck Trent Johnsen