The evident failure of many government programs to identify promising companies and to provide adequate capital for corporate needs explains the continued search for an effective program.
Several different policy approaches would improve circumstances and make a difference. For example, government programs could promote greater reliance on individual Canadians to identify and invest in promising small companies, placing less weight on bureaucratic decisions. Personal tax credits on the purchases of small-cap shares would encourage investment, offsetting significant related risks. Further, tax-assisted financings have the advantage of flexibility for growing companies, enabling small firms to raise capital at different stages of enterprise growth — in private and public markets, and through secondary rounds of financing as business operations expand and as markets are receptive to financing initiatives.
Finally, a system of personal tax credits, unlike direct grants and loans, is a more effective use of tax expenditures, given the associated multiplier effect on the economy. The hidden value of tax-assisted financing is it acts as a catalyst to cycle equity capital within Canadian communities, as individual investors often focus on familiar small business prospects in local communities. The startup and expansion of local enterprise bring more skilled job opportunities, increased incomes and greater economic vibrancy to communities across the country. Tax-assisted financing also facilitates the clustering of local small enterprise in communities, combining with educational institutions and the available local workforce, to reinforce success.
A second policy approach is to encourage large investment funds, notably pension funds, to invest in Canadian small business. Many large pension funds have been reluctant to invest in small business, private and public equity reflecting credit risk and small-scale investments having relatively high investment costs.
The federal government could mandate federally regulated pension funds to invest a minimum small business investment threshold as a share of total invested assets. This minimum investment threshold could release a significant amount of equity capital to the small business sector, and yet would have a minimal impact on overall portfolio returns for pension beneficiaries. This approach would encourage Canadian pension funds to follow the lead of the superannuation pension funds in Australia that support and contribute importantly to small business investment.
Ian Russell is a partner with Russell Deacon & Co.and past president of the Investment Industry Association of Canada.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
