The Investment Industry Association of Canada (IIAC) says that government action is needed to help boost productivity and stoke investment, which would also boost the fortunes of Canada’s floundering small dealers.
In its submission to the House of Commons Standing Committee on Finance as part of its pre-budget consultations, the IIAC makes a handful of recommendations.
Specifically, it calls for the government to study the impact of a introducing a lower capital gains tax rate for small business investments; to study the adoption of a small business financing incentive program; and, to harmonize tax treatment of employer contributions to RRSPs with the treatment afforded to pension plans and with the new Pooled Registered Pension Plans (PRPPs).
The IIAC points out in its submission that there’s a need for direct business investment to expand existing enterprises and build new companies to create new jobs, and it notes that small companies in particular “find it difficult to raise risk capital for expansion.”
The government has recognized this, it acknowledges, through its recent budgetary measures to support the venture capital industry, however, it says that “a widely-applicable tax-assisted incentive is the most effective means to channel capital to small companies.”
Moreover, the submission notes the effect of weak productivity, and markets, on small investment dealers, pointing out that 30 small and mid-sized firms have left the business over the past four years. “The amalgamation of small dealers can lead to stronger firms; but an accelerated pace of consolidation foreshadows negative consequences for our markets and economy,” it warns. “The demise of the small dealer will limit consumer choice for wealth management services, aggravate the already difficult financing problem for small and mid-sized companies that were traditionally served by smaller dealers, and erode the liquidity of TSX and Venture listed shares.”
“To ensure that small dealers survive, both industry and regulators must continue to monitor and adjust their business and rule-making models respectively to cope with new realities; however, this could be bolstered greatly by the adoption of the recommendations we have made to improve Canadian productivity and re-ignite participation in the capital markets,” it adds.