A group of Canadian business leaders are pressing the federal government to offer more tax cuts for people who start and finance companies, arguing stronger incentives for taking risks would help keep entrepreneurs and their money in Canada. 

In an open letter to Finance Minister François-Philippe Champagne, more than 100 investors, entrepreneurs and CEOs call for bigger tax breaks on profits that founders, investors and employees make from selling business shares. The letter, published Tuesday, also recommends Ottawa let business shareholders delay paying taxes on those profits if they reinvest the proceeds in another Canadian company. 

Six industry associations are leading the campaign: The Canadian Venture Capital and Private Equity Association (CVCA), the Council of Canadian Innovators (CCI), the National Angel Capital Organization (NACO), the Chartered Business Valuators Institute, CPA Ontario and C100, a network of Canadian entrepreneurs in Silicon Valley. 

The letter’s signatories include Maverix Private Equity founder John Ruffolo, Intrepid Growth Partners president and co-founder Mark Shulgan, Ripple Ventures founder Matt Cohen and Jacques Bernier, managing partner of Teralys Capital. Borrowell CEO and co-founder Andrew Graham also signed, as did Magnet Forensics CEO Adam Belsher, AlayaCare CEO Adrian Schauer, and Jobber CEO Sam Pillar. 

The group pushing for the new tax policy wants the break to apply to up to $15 million in profits from selling shares in each eligible company. It also wants the government to remove minimum ownership requirements, so people who own only a small share of a business could benefit. 

NACO chief executive Claudio Rojas said the proposed tax breaks could help reverse the appeal of investing or starting a company in the U.S. instead of Canada. “When entrepreneurs and employees in a startup are taking the risk of starting a business, they’re mindful of the after-tax dimensions,” he said, “and so it’s critical that we are a competitive regime to the U.S.” 

The tax-reform push comes after the government announced a so-called Productivity Mega Deduction at the Canada Investment Summit last month. That scheme aims to attract more business investment to Canada by letting companies deduct the full cost of most new equipment and other business assets from their taxable income right away, rather than over several years. 

CVCA CEO Benjamin Bergen said the deduction will make investment more attractive for established companies involved in the government’s major-projects agenda—those building big infrastructure, energy and critical minerals projects, for example. The incentive for entrepreneurs proposed in Tuesday’s letter, he said, would complement that scheme by encouraging support for younger companies at a riskier stage, when they are still developing their products and establishing a market. 

The group’s proposed tax cut is effectively a Canadian version of the U.S.’s Qualified Small Business Stock program, which makes profits from the sale of eligible business shares exempt from federal capital gains after a required holding period. 

The tax break proposed in Tuesday’s letter would build on the Canadian Entrepreneurs’ Incentive, which Ottawa announced in its 2024 budget to counteract proposed hikes to the capital gains inclusion rate. The entrepreneurs’ incentive would have reduced the share of eligible profits counted as taxable income from 50 per cent to one-third, on a lifetime maximum of $2 million. The government scrapped the tax break, however, when it cancelled the planned capital gains changes amid intense backlash from the business community, including from the CCI, which Bergen led at the time. 

Bergen said cancelling the capital-gains increase still leaves Canada to compete with more generous U.S. tax incentives for founders, employees and investors, which he argued are a main reason scaling businesses move to the U.S. He said the timing is now right to change that, pointing to renewed interest in Canada from investors and business leaders. 

“We’re in a bit of a Goldilocks moment,” Bergen said. “If investors are going to look at opportunities, if builders are going to create here… we need to make sure that we’ve implemented the policies that lead to that transformation.”