Tech firms urge province to offer tax incentive
Calgary among lowest in venture capital investment
Anumber of alberta technology companies and associations are asking the province to consider a tax credit to boost investment in the sector, arguing it would help diversify the economy and spur products getting to market.
“It could put the sector on investors’ radar,” Trevor Doerksen, CEO of Calgary-based Mobovivo, which creates video apps, said of the idea. “If a tax credit helps investors take money from under their mattresses. . . . No matter what, Alberta needs to diversify its story.”
Calgary has one of the lowest rates of venture capital investment per $1 million of GDP, according to the Toronto Board of Trade. At $808, this city is below Vancouver, Montreal, Halifax and Toronto. Edmonton wasn’t included on the list.
San Francisco, by comparison, sees more than $16,000 of venture capital per $1 million of GDP.
James Pettigrew, a partner at PWC and the company’s Alberta leader for technology, said the sector has struggled to compete for investment dollars.
“We haven’t had a strong infrastructure, there’s very few (venture capital) funds, and as a result that gap in investment has been filled by private investors,” he said. “It means competing directly against the energy sector and energy services.
“And there’s a very well-defined capital pipeline in oil and gas.”
As well, energy sector investments are eligible for flow-through shares, which means investors can accelerate a tax deduction.
“Those flow-through share options haven’t been available for other industries,” Pettigrew said. “Investors with a dollar to invest may be more likely to invest where there’s a tax advantage.”
In a letter to Premier Alison Redford posted to the Alberta Technologies website, where a petition had collected 110 signatures as of Monday, tech entrepreneur Trent Johnsen, of Hookflash, and Techrev’s Pam Boytinck point out a number of government and industry studies have recommended a tax credit over the years, including 2007’s task force on value-added and technology commercialization.
They said B.C. has leveraged $256 million in tax credits into $2.3 billion of equity investment in earlystage technology companies, quoting the 2010 Hellman Schure report. B.C. offers a 30 per cent tax credit and Pettigrew said Ontario is considering reinstating one.
The Hellman Schure report also said the B.C. government received $1.98 in taxes for each $1 of tax credit.
Robyn Cochrane, a spokeswoman for the province’s finance department, said the government is undertaking a review of its overall fiscal framework, which would include areas such as tax credits. But she couldn’t say whether the tech credits being pitched are specifically being looked at.
The province’s science, research and experimental development tax credit provides a credit to the company of 10 per cent for expenditures up to $4 million, Cochrane added.
Boytinck and Johnsen point out that along with increased economic diversification of the provincial economy, a tax credit would help grow technology investment banking, provide a legacy of technology entrepreneurship and create more knowledge-based jobs.
“A progressive policy will enable Albertans to meet the challenges and opportunities presented by both globalization and the technology revolution,” their letter states.
Pettigrew said tax credits promote earlier investment in companies and promotes deal flow.