Alberta spring budget should boost innovation with tax credits, say entrepreneurs

Tech entrepreneurs say tax credits that the province scrapped in October are needed to boost diversification and innovation in Alberta, and are calling on the government to bring back investor certainty in this week's budget.

The province's October budget axed the Interactive Digital Media Tax Credit, which supported Alberta businesses developing interactive digital media products, as well as the Alberta Investor Tax Credit, an investment in non-traditional sectors with strong job-creation potential.

Keith Warner, president of New World Interactive, a video game developer, says if he knew what he knows now, his company may not have come to Calgary.

"Looking forward, we will just outsource a lot more, so Calgary and Alberta will not derive the benefits," he said.

He adds the change the government is making — getting rid of targeted tax credits in favour of lower taxes for all businesses — is "short-sighted."

"I look at it as an inconsequential incentive that benefits big companies, big tech companies, which we are not," he said.

As for the future, Warner says New World Interactive will look at the business proposition that makes the most economic sense for it.

"We were in Amsterdam, for instance, for 3½ years, at the end of which we closed and moved here. The same thing could potentially happen," he said. 

Kenney's response

Premier Jason Kenney says the province has lowered the overall tax rate for all businesses whereas the Alberta Investor Tax Credit picked "winners and losers."

"The Alberta investment tax credit was a little tiny boutique application-based process. In other words, filled with red tape that a lot of people were not going to go through," he said.

The premier says the tax supported 160 businesses in Alberta and adds that in order to incentivize businesses growth, the government opted for a general reduction in the overall tax rate.

However, Calgary and Edmonton chambers say they're lobbying the government to make room for innovation for the next budget, which will be unveiled Thursday.

Sandip Lalli, Calgary Chamber CEO, says low tax rates help only those businesses making money, not those in the tough early years.

"Let's make sure we really hear from the business community and those folks that are counting on these types of credits to grow their businesses and gain market share," she said.

She says it's encouraging that the government has reintroduced a film and television tax credit, but something for the tech sector would help bring confidence back to those industries.

"To track new investment, that's great, but new investment is into the technology space, which is pre-revenue for about six, seven years. So the investor tax credit actually helps the investor more than a corporate tax credit," said Lalli. 

Lalli adds that she sees a chance for redemption in the upcoming spring budget with research-and-development credits — a tax that helps businesses reduce their taxable income.

"We need to say, 'here's the sustainable path forward to growth, and it includes innovation,'" she said.