In his latest industry letter, IIAC President and CEO, Ian Russell highlights that small business equity financings in Canada are down 40 per cent this year, in addition to the 40 per cent decline in 2012. Small IPOs are also down about 50 per cent and financing, particularly in the energy and mining sectors, are at a loss. Russell cites weak economic conditions, tax changes and high-risk behaviour from investors as culprits, which have depressed stocks and liquidity for small firms, thwarting their ability to raise capital.
“One aspect of small business is that capital flows are tight,” says Tabet. “Small businesses have more challenges as it relates to getting loans and accessing capital. It’s more expensive to access capital.”
Arguing that public and private markets for small business are imperative to generate capital, Russell suggests a selective reduction in the capital gains tax and special tax-incentives for start-ups, similar to the U.K. Enterprise Investment Scheme, which offers a 30 per cent income-tax deduction for those eligible.
“Anything that the government does to lower taxes relative to investment allows the small business to be a little more dynamic,” says Tabet. “It provides some benefit for the economy, for the corporation and for the employer, in general.”