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Speaking Notes
Lloyd Matthews
Minister of Finance
Venture Capital Tax Credit Programs
October 30, 2000


Thank you, Minister McLean.

As Minister McLean has indicated, government intends to proceed with two programs � a new Direct Equity Tax Credit, and a Labour-Sponsored Venture Capital Tax Credit.

  • These new programs are designed to stimulate the growth of small business and new jobs in expanding areas of the economy, with a particular focus on the needs of rural Newfoundland and Labrador.
  • Target opportunities will include small businesses such as information technology, aquaculture, advanced technologies, dimension stone, manufacturing, value-added resource based enterprises (forestry and agrifoods), tourism and cultural industries.
  • Our consultation with the business community revealed the need for both programs. They are complementary and respond to the demand of capital requirements for businesses at various stages in their development.
  • The direct equity program is suitable to early stage or start-up operations, while the labour-sponsored venture capital program is more suitable to bringing the business past the early stage to the next level.

Here�s how the programs will work.

  • The Direct Equity Tax Credit program provides individual investors with a provincial tax credit for investing directly in an eligible business through the purchase of newly-issued shares.
  • The tax credit helps lessen the risk for the investor, while giving early-stage companies greater access to private investment from individual investors.
  • The Direct Equity Tax Credit has been designed to stimulate business investment generally, and to meet the particular challenges in rural areas of the province where it is typically more difficult to raise capital. Consequently, government has decided to implement a two-tier rate structure.
  • The Direct Equity Tax Credit will provide a tax credit rate of 20 per cent for investment in eligible businesses on North East Avalon, and 35 per cent to investors who make a direct investment in an eligible business in the remainder of the province.
  • A more aggressive approach is required to attract equity capital to rural areas of the province. Consistent with that theme, this incentive for rural areas is among the most aggressive in the country.
  • The second program we are announcing today is the Labour-Sponsored Venture Capital Tax Credit program.
  • Simply put, the Labour-Sponsored Venture Capital Tax Credit program is administered by a registered venture capital corporation that is sponsored by a labour group.
  • The corporation may raise funds from individual investors who can receive provincial and federal tax credits. A provincial tax credit of 15 per cent will be provided, along with a federal tax credit of 15 per cent, for a combined incentive of 30 per cent. The funds are then pooled and invested by the venture capital corporation in eligible businesses.
  • Government will approve a venture capital corporation through a call for proposals from proponents.
  • In keeping with our focus on the rural challenge, preference will be given to proponents whose business plan commits to target at least 50 per cent of its investments outside the North East Avalon.
  • Government will issue a call for proposals from potential venture capital corporations in the next month or so. Based on an assessment of proposals, the venture capital corporation will be selected and given permission to raise funds within the province and issue provincial tax credits to investors. The successful corporation should be up and running early in 2001.
  • The Federation of Labour will be consulted in the development of the criteria and guidelines prior to the call for proposals.
  • Today�s announcement reflects government�s ongoing commitment to support and encourage economic development throughout Newfoundland and Labrador, particularly in rural areas of the province.
  • Jobs and Growth remains high on Government�s agenda and further measures to stimulate economic growth will be revealed with the release of government�s jobs and growth strategy later this fall.

Thank you.

And now, I�d like to open the floor to questions from the media.

2000 10 30


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