Securities commission pleased with tax reform
Published Friday May 1st, 2009
Telegraph Journal
Finance Small-business investment tax credit recommendations came out of the first two editions of the Fullsail Summit
SAINT JOHN - The New Brunswick Securities Commission feels the provincial government is headed in the right direction in its plans to rewrite the rules that govern who is eligible for small-business investment tax credits.
Andrew Nicholson
In his budget speech in March, Finance Minister Victor Boudreau announced two improvements to the province's small business investor tax credit program and indicated that further changes are being considered. Boudreau announced that the maximum investment eligible for the tax credit was climbing to $250,000 from $80,000 and he said the government wants to make a greater number of investors eligible to participate.
Both initiatives were among the recommendations that came out of the first two editions of the Fullsail Summit sponsored by the securities commission.
"The department of finance is considering changes and the minister alluded to them in his speech, but the staff have not made the exact wording of the changes public yet," said Andrew Nicholson, the commission's director of education and market development. "Our hope is that it will allow a greater number of individuals or corporate individuals to qualify for the tax credit.
"We've heard anecdotally that professional corporations, for example, could become eligible. The corporation may have money to invest, but under the current rules it isn't able to get a tax credit."
Those changes will be especially beneficial during the recession as credit markets have tightened.
"Other provinces have found language that allows companies that are further apart than arm's length to invest and still get credit for that investment under the investment tax credit regimes," Nicholson said. "It will be a big step forward. We're very hopeful that the messages that we gave when we submitted our responses to the green paper on taxes will be heard. (Department officials) have been very receptive to our point of view and I think they're realizing that changes can have a positive impact."
The commission will host Fullsail Summit 2009 on May 11-12 at the Delta Fredericton. The gathering, now in its third year, attracts entrepreneurs, investors, politicians, civil servants and academics for a two-day discussion of initiatives aimed at increasing entrepreneurship and equity capital investment in New Brunswick.
Speakers include New Brunswick entrepreneurs Curtis Howe of Mariner and Gene Fowler of FatKat Animation Studios, journalist John Ibbitson and Peter Schiff, the president of Connecticut-based Euro Pacific Capital, who predicted the 2008 market collapse.
Nicholson said expanding the list of eligible investors would have wide-ranging benefits and could help companies that hope to take advantage of the province's emergence as a regional energy hub.
"We support widening the definition of an eligible investor," he said. "For instance, let's say a company wants to expand and they have a supplier that really thinks that this company has an excellent chance (of becoming successful) and the supplier is not owned by the same corporate entity ... why shouldn't they get a tax credit for making that investment? If it was an individual making the investment, they would get a tax credit."
He said a parent company shouldn't receive tax credits for investing in a subsidiary, but suggested it would be appropriate for a larger company to invest in smaller companies that might serve as suppliers.
"We are very hopeful that the Department of Finance will see fit to widen that definition. Any changes that they're prepared to make will be positive ones."
The higher investment limit is another very positive step forward, Nicholson said.
"There are only three provinces at that level and we're one of them," he said. "(Victor Boudreau) didn't tie a whole bunch of strings to (the increase). He didn't say you have to be in rural instead of urban New Brunswick and he didn't say you have to be in a particular type of industry. His speech indicated that it was going to be a very broad widening of that limit and he didn't attach any conditions to it. It puts New Brunswick at the leading edge, in our opinion.
"We were very pleased when (the government) moved from $50,000 to $80,000 and we're even more pleased that they're increased it to $250,000."