An Evaluation of the Venture Capital Program in British Columbia
The study focuses on the economic and financial performance of the companies in the program, including a comparison of the tax credits received versus the taxes paid by these companies. This report was prepared for the Ministry of Small Business, Technology and Economic Development by UBC Sauder School of Business, and UVic Department of Economics, in close cooperation with Rocket Builders.
Key Findings:
Taxes:
Estimates suggest that for every $1 of provincial tax credits issued, recipient companies generated $1.98 in provincial taxes; and for every $1 of Canadian (i.e., combined provincial and federal) tax credits issued, they generated $2.92 in Canadian taxes.
The BC tax multiplier was lower for the non-retail portion because the federal government does not carry any of the tax credit costs for the non-retail segment
The two largest tax items were PST, which accounted for 35% of all tax revenues, and federal income taxes paid by employees, which account for 31%.
Combined provincial and federal corporate taxes accounted for less than 3%.
Employees:
Companies in the program generated on average of 2.43 new jobs every year
Net job creation persists every year and they are full time, 93% in BC
Key Recommendations:
Support both market segments: At present there are budgetary restrictions that prevent the use of funds across segments
Greater budgetary flexibility where unused credits could be rolled over for several years
The federal government should participate in the costs of the EBC and VCC programs
Moderate increases of investment limits, and suggest introducing a system of supplementary allowances in years where the budget is unlikely to be fully used
Raising the investor limit in proportion to the company limit, so as to allow companies to raise more without having to reach out to a larger number of investors