NLIS 44
March 27, 2003
(Industry, Trade and Rural Development)
 

Government strengthening small business climate in the province

Government is introducing new measures to strengthen the small business climate in the province, building on significant new steps it has taken over the past several years to encourage growth and new jobs in the small business sector. Budget 2003 reflects a further major investment in this area.

"Small businesses make up 95 per cent of all business enterprises in our province and create 80 per cent of all new jobs in our economy today," said Industry, Trade and Rural Development Minister Judy Foote. "Their continued growth and development is key to a diversified and vigorous economy in all parts of the province, especially in rural Newfoundland and Labrador."

New measures announced today include:

• Small businesses with less than $200,000 in taxable corporate income are presently taxed at the rate of five per cent, as compared to the general corporate income tax rate of 14 per cent. The $200,000 small business corporate income tax threshold will be increased to $300,000 over four years, in $25,000 increments annually, beginning in 2003.
  
  
• A corporate tax-free holiday will be provided for new small businesses that start up in the province, between April 1, 2003 and March 31, 2006, in designated growth sectors of the economy. A three-year tax holiday will be provided for eligible businesses located in the Northeast Avalon region and a five-year tax holiday will be provided for eligible companies located outside the Northeast Avalon area.

• Government will increase the existing payroll tax exemption threshold from $500,000 to $600,000 for those small businesses with a total payroll under $600,000. The payroll tax will also be eased on a graduated basis for those small businesses that have a total payroll of between $600,000 and $700,000. Government also commits to further reductions and the elimination of the payroll tax for all small businesses by the end of the next mandate of this government as our fiscal situation permits.

• The existing Venture Capital (Direct Equity) Tax Credit Program will be enhanced to make corporations eligible for investment tax credits, in addition to individual investors. This will open up new sources of capital for existing businesses looking to expand and for entrepreneurs looking to start up a new venture.
  
  
• Government will issue a public call for proposals within 60 days for the establishment of a provincially-based labour sponsored venture capital corporation by offering a provincial tax credit as an incentive to set up such a fund in the province. Flexibility will be provided in the call for proposals to allow for alternatives to a labour sponsored venture capital fund, including the possibility of support to a regionally or nationally based venture capital fund, if structured in a manner that meets provincial objectives.
  
  
• Starting in 2003, existing or new venture capital corporations in the province, whose objectives are to invest in growth-oriented sectors of the economy designated by government, will be eligible for a 10-year corporate income tax holiday. If the business objectives of the venture capital corporation focus predominately on rural Newfoundland and Labrador, an additional five-year tax holiday will be provided, for a total corporate tax-free holiday of 15 years. These incentives will not apply to a venture capital corporation ultimately selected to receive the benefit of the tax credit referenced above.

These measures will open up new sources of capital for existing businesses looking to expand and for entrepreneurs looking to start up a new business.

• A Red Tape Reduction Committee, comprised of experienced and respected entrepreneurs, will be established in 2003 to identify opportunities to reduce, streamline or eliminate the regulatory burden of "red tape" which may unintentionally act as a barrier to new job creation and business growth, especially for small businesses. This will be approached without compromising legitimate public policy objectives such as the protection of the environment or workplace health and safety. Details on the operation of the committee will be released in the near future.

"The new measures we have announced today reflect the priority and emphasis this government places on small business development. In particular, they directly address a key challenge many entrepreneurs face in raising new capital, and retaining as much of their earnings as possible for reinvestment back into their businesses in order to create new opportunities and new jobs in our province," said Minister Foote.

Media contact: Tansy Mundon, Communications, (709) 729-4570.

The enterprising spirit of the private sector is the engine of economic growth. Government�s role is to establish and maintain an environment that allows private enterprise to be competitive and create lasting economic wealth. During the jobs and growth consultations, many entrepreneurs came forward with ideas for strengthening our overall small business environment. Government listened and has been putting that advice to work through the Renewal Strategy for Jobs and Growth. A summary of the major initiatives already implemented is provided below. These do not include the new measures announced in the Budget 2003.

• The EDGE program has been enhanced to make Newfoundland and Labrador the most competitive jurisdiction in Canada for encouraging new business investment, with enhanced benefits for businesses starting up or expanding in rural areas.
  
  
• The payroll tax for small businesses with payrolls of $500,000 or less has been eliminated, removing 95 per cent of all businesses from the payroll tax rolls and putting an estimated $8.6 million back into the hands of entrepreneurs each year for reinvestment into their businesses.
  
  
• Two new programs have been created to assist small businesses take advantage of new growth opportunities in our economy � a $2 million Small Businesses Seed Capital Equity Program and a $500,000 Small Business and Market Development Program.
  
  
• A new Venture Capital (Direct Equity) Tax Credit Program has been introduced to encourage private investment in new or expanding small businesses, with enhanced incentives for those who invest in eligible businesses located outside Northeast Avalon area. A 20 per cent tax credit is available for those who invest in eligible businesses in the Northeast Avalon region and a 35 per cent tax credit is available for those who invest in eligible businesses located outside the Northeast Avalon region.
  
  
• The Collective Enterprise Development Program, which provides loans from $500 to $5,000 to very small (micro) businesses and self-employed entrepreneurs, has been expanded in partnership with the Federation of Cooperatives.
  
  
• In partnership with the federal government and community economic development organizations, a new $10 million small business investment program has been established to focus specifically on the needs of rural communities impacted by the collapse of the groundfish industry.
  
  
• Additional investments have been made with the federal government to strengthen and expand the network of "single window" federal-provincial-community business service centres in each of the 20 economic zones. These centres are designed to provide more accessible and streamlined "one-stop" support services to the small business sector in all areas of the province.
  
  
• Steps have been taken to reform the workers� compensation system to make it more competitive, effective and affordable for workers and employers throughout the province.
  
  
• A Small Business Advisory Council has been established to provide ongoing advice on appropriate measures government should consider to help stimulate and grow the small business sector over the long term.

Media contact: Tansy Mundon, Communications, (709) 729- 4570.

2003 03 27                                      4:20 p.m.