Alberta Government exploring flow-through shares for tech sector in absence of cancelled tax credits

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Calgary Herald | Amanda Stephenson | Dec 19, 2019

Calgary downtown - Alberta Government exploring flow-through shares for tech sector in absence of cancelled tax creditsAfter eliminating a suite of business tax credit programs in this fall’s provincial budget, the UCP government is now considering allowing startup technology companies to issue flow-through shares as way to help attract capital investment to the rapidly growing sector.

The government has established a working group to explore ways of boosting the tech sector and helping startups attract much-needed investment capital. The group — made up of tech sector stakeholders as well as people with business, financial and academic expertise — has the mandate to look at all options, but the government has already identified the idea of a flow-through share program as one possibility.

A flow-through share arrangement is a tax-based financing incentive through which issuing corporations can pass eligible expenses along to their shareholders, who can then deduct them from their income. Flow-through shares have been used successfully in the mining, oil and gas, and renewable energy sector to help companies finance their exploration and project development activities, and many of those involved in Alberta’s tech sector have suggested it could also work for that industry, said Economic Development Minister Tanya Fir.

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“These sectors have similar challenges as technology startups — inherent risk, high startup cost, long routes to profitability,” Fir said in an interview. “And the (flow-through shares) approach would eliminate one of the key challenges of the previous tax credit programs, which was heavily bureaucratic.”

The UCP fell under heavy criticism by some in the tech sector this fall for its decision to eliminate the Alberta Investor Tax Credit, which was introduced by the previous NDP government and provided a 30 per cent tax credit to investors who put money into targeted growth industries such as clean technology and digital animation. The government also eliminated a number of other targeted tax credit programs, including the Capital Investment Tax Credit and the Interactive Digital Media Tax Credit.

Fir said those programs were hampered by red tape and were an inefficient way of delivering benefits to businesses.

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