Tech sector urges Ottawa to expand capital gains tax incentives for startups
More than 100 businesses and executives want the government to broaden a founders' tax break and allow gains to be deferred when reinvested.
OTTAWA — More than 100 Canadian businesses, industry groups and executives are urging the federal government to expand capital gains tax incentives for high-growth startups.
In an open letter sent to Finance Minister François-Philippe Champagne on Tuesday, the coalition called for two specific changes to encourage more investment.
First, it proposes expanding the Canadian Entrepreneurs’ Incentive, which since 2024 has offered lower capital gains tax rates for startup founders.
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Second, it asks that entrepreneurs and investors be allowed to defer capital gains on proceeds from selling a stake in a startup when that money is reinvested in another startup.
“For someone who has successfully built or backed a Canadian company, that would create a stronger incentive to put the proceeds back to work rather than take them out of the growth economy,” the letter said.
The letter is part of a campaign from the Canadian Council of Innovators and the Canadian Venture Capital and Private Equity Association called Bet on Canada.
Signatories include Maverix Private Equity founder John Ruffolo, Borrowell CEO Andrew Graham, CVCA CEO Ben Bergen and KOHO Financial Inc. CEO Daniel Eberhard.
Ben Bergen said in an interview that Prime Minister Mark Carney’s recent Canada Investment Summit focused on attracting major institutional investors.
“But this policy activates and mobilizes individual Canadians to participate in the economic investment opportunity that is in front of us right now,” Bergen said.
He added that now is a good time to ask as the government prepares to table its next budget.
Currently, the Canadian Entrepreneurs’ Incentive offers lower tax rates for founding investors on up to $2 million in capital gains.
To be eligible, founders must own at least 10 per cent of a business that has been their principal employment for at least five years.
The letter proposes raising the cap to $15 million and broadening eligibility to better rival the U.S. Qualified Small Business Stock framework.
The QSBS deduction exempts all capital gains made on investments in businesses with up to US$50 million in assets from federal taxes.
Unlike the Canadian incentive, the QSBS does not differentiate between founders, investors and employees.
“These changes would make Canada more competitive with the United States,” the letter said.
The letter said the policies should not be limited to the technology sector, noting that companies in advanced manufacturing, life sciences, mining and natural resources face similar challenges.
Canada has long struggled to maintain a robust growth capital ecosystem for domestic startups.
The Senate committee on banking, commerce and the economy has spent much of 2026 studying the issue and plans to release recommendations in the coming months.
Implementing a QSBS-style incentive and allowing capital gains deferrals for reinvested startup proceeds are among ideas presented to the committee.
“Most investors who stand to benefit from this kind of incentive are not large institutional players, but ordinary Canadians,” the letter said. “At its core, this is about rewarding the risk Canadians take when they invest in other Canadians.”
The call for tax changes follows a separate push in September by economists and executives for sweeping reform, including universal capital expensing.
With files from The Globe and Mail