The top news item yesterday (February 27) was the release of the federal government 2018 budget. Entitled ‘Equality & Growth’ it was touted as a the first-ever Canadian federal budget developed through a gender-based assessment. While there was much to unpack in the document, the main themes included Science, Gender and Indigenous issues. The budget pledges $1.2B over five years to bring in new measures aimed at increasing gender equality and investments in skills training and child services in Indigenous Communities.
In addition, a number of announcements were made that have direct relevance to the technology community including:
- A significant step back from taxation of passive investments
- Streamlining of government innovation programs (e.g. Build in Canada Innovation Program)
- Increased funding for IRAP
- Funding for a new Cyber Security Initiative
- A women’s entrepreneurship strategy
- Roll out of a new IP Strategy
The details of how these proposals will rollout remains to be seen however we’ll follow up with further information as it becomes available to us. In the meantime, here’s a summary of information from the budget on the above items relevant to the tech sector.
Taxation of Passive Investments
The government stepped back on the taxation of passive investments. It is now focused on a simpler proposal that disallows the small business tax rate (of 9%) to be used for passive investments that return over $50K / year. (Investors who make between $50K - $150K will face a sliding scale to the regular corporate tax rate). While this may result in some increased tax for small investors, it will be nowhere near the potential costs of the previous proposal, and both CVCA and NACO felt this wouldn’t affect the majority of their investors (who were already above the small business tax threshold anyways).
The government is following through on the recommendations of the Barton Advisory Council on Economic Growth by streamlining the number of innovation programs (from 93 to 31) and consolidating them into four platforms: the Industrial Research Assistance Program (IRAP), the Strategic Innovation Fund, the Canadian Trade Commissioner Service, and Regional Development Agencies
Of particular interest to ICTAM members and Manitoba’s broader tech ecosystem will be funding increases provided to IRAP which will receive an additional $700M over the next five years (and $150M per year going forward)
With the increased funding, projects under IRAP of up to $10M will now be eligible (an increase from $1M previously), and any projects over $10M will be part of the Strategic Innovation Fund (SIF). The SIF, which was launched in the 2017 budget but has yet to deliver on any funding requests, had been overwhelmed by the number of funding requests it received. Many of those smaller projects that can now, potentially, fit into IRAP.
We will be following up with ISED to see how these changes will roll out in practice, but our hope would be that this will allow the SIF to move forward on applications it has received, and provide a home for some of the smaller projects within IRAP.
There was a strong focus on women’s entrepreneurship, including:
- An increase of the BDC Women in Tech Fund from $70M to $200M, and increased financing available for women entrepreneurs overall with $1.4B over three years through BDC’s lending programs
- $105M over 5 years through the Regional Development Agencies to support a Women’s Entrepreneurship Strategy
- $10M over 5 years to connect scaling women-led business with expanded export services
- A commitment to develop better information on procurement by women-led companies, which is currently lacking
- Increased efforts to improve diversity in private VC firms, including using diversity as a lens for the VCCI program
The government will consolidate the Build in Canada Innovation Program (BCIP) into the newly launched Innovative Solutions Canada which will be one consolidated government procurement program. In addition, the government will invest $196.8M in establishing a new online platform for procurement.
$508M was committed to Cybersecurity initiatives over the next 5 years, including:
- $155M to the Communications and Security Establishment (CSE) to establish a new Canadian Centre for Cyber Security
- $116M for a National Cybercrime Coordination Unit in the RCMP
- $236.5M to support a National Cyber Security Strategy
The government has rolled out elements of the IP Strategy that it committed to last year, including:
- $30M for the establishment of a patent collective to help scaling Canadian companies access the patents they need
- $21.5M to develop IP expertise and legal advice for Canadian companies
- $33.8M to establish an IP marketplace, which will be a one-stop, online listing of public sector-owned intellectual property available for licensing or sale to reduce transaction costs for businesses and researchers
- $572.5M over 5 years will be provided for Digital Research Infrastructure to increase access to advanced computing and big data for researchers
- $15M to the Institute for Quantum Computing over 3 years
- $4.6M to increase the effectiveness of the Start-up Visa program over 5 years
- $10M for the Canadian Technology Accelerator program over 5 years