The friction between the Canadian technology ecosystem and federal tax policy has entered a new phase. Hundreds of prominent tech CEOs, founders, and venture capital investors have signed an open letter addressed to Prime Minister Mark Carney's government, demanding critical tax reforms in the upcoming federal budget. Spearheaded by industry groups including the Council of Canadian Innovators (CCI) and the Canadian Venture Capital and Private Equity Association (CVCA), the campaign known as 'Bet on Canada' seeks to reverse the chill of previous fiscal policies and introduce aggressive incentives designed to retain domestic talent and capital.
The push comes in the wake of Budget 2024 proposals that hiked the capital gains inclusion rate for businesses from 50 percent to 66.7 percent, alongside increases for individuals. While the federal government previously defended these measures as a way to generate billions in revenue and target a fraction of the population, tech leaders argued the changes severely damaged the country's economic competitiveness. Figures like Wealthsimple co-founder and CEO Michael Katchen warned that introducing new taxation forms during a critical productivity crunch would actively disincentivize domestic investment and push top-tier talent toward more forgiving jurisdictions like the United States.
Now, as Prime Minister Mark Carney's administration signals a more business-friendly posture through initiatives like the Productivity Mega-Deduction, industry associations are seizing the moment to advocate for structural fixes. The open letter outlines two primary demands. First, the sector wants a tax incentive modeled after the American Qualified Small Business Stock (QSBS) regime. While Ottawa previously introduced the Canadian Entrepreneurs' Incentive to reduce inclusion rates on a lifetime maximum of $2 million in eligible capital gains, the coalition is pushing for a much larger exemption of up to $15 million per transaction. Furthermore, they want this benefit broadened beyond just founders to include early stock-holding employees and investors.
Second, the coalition is calling for a capital gains rollover. This mechanism would allow investors and founders to defer capital gains taxes when the proceeds from selling a Canadian business investment are immediately reinvested into another domestic company. CVCA CEO Benjamin Bergen noted that the core objective is to create a closed loop of capital where successful entrepreneurs who achieve a major exit are incentivized to keep playing, recycling their wealth and expertise back into building the next generation of Canadian ventures.
For founders, builders, and business leaders, this policy fight goes to the core of capital formation in Canada. Raising capital remains an uphill battle amid persistent macroeconomic headwinds like high interest rates. Without structural tax relief that encourages early-stage risk-taking and domestic reinvestment, the innovation economy risks losing its brightest builders to foreign markets. As the Carney government prepares its upcoming budget, the decision to adopt or ignore these recommendations will serve as a definitive litmus test for Canada's commitment to tech-driven economic growth.