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| EST. READ TIME 2 MIN.Rate of business start-ups dropping as Canada’s population ages; capital gains tax reform an option for boosting entrepreneurship
Business start-ups, and entrepreneurship more generally, drive productivity and economic growth. But the rate of business start-ups in Canada is declining. Since it peaked in 2004, the rate of business start-ups as a share of existing firms has declined by 16.2%.
The rate of decline in business start-ups increases as the size of the firm (measured by employment) increases. Over the last decade, from 2003 to 2012, the rate of business start-ups for firms with 5 to 20 employees declined 41.3%, compared to a drop of 8.0% for firms of all sizes over the same period.
There is increasing evidence of a relationship between entrepreneurship and age. Specifically, younger people are less risk averse than older people and are more prone to question the status quo. These characteristics are key to the entrepreneurial process. Like all industrialized countries, Canada’s population is aging; a greater and greater share of the population is over age 65. Statistics Canada expects the portion of those over age 65 as a share of the population to increase by 74.1% between 2008 and 2035.
Can governments use policy levers to influence entrepreneurship so as to mitigate these demographic effects? This essay focuses on the benefits of capital gains tax relief since it both improves the incentives for entrepreneurs and assists those financing business start-ups. Currently, Canada has the 14th highest capital gains tax rate. Canada has an opportunity to supercharge its entrepreneurial environment by reducing the capital gains tax rate, creating a rollover as has been done in the United States, or simply eliminating the capital gains tax, as has been done in many OECD countries.
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Jason Clemens
Executive Vice President, Fraser Institute
Jason Clemens is the Executive Vice President of the Fraser Institute and the President of the Fraser Institute Foundation. Hehas an Honors Bachelors Degree of Commerce and a Masters Degree in Business Administration from the University of Windsor as well as a Post Baccalaureate Degree in Economics from Simon Fraser University. Before rejoining the Fraser Institute in 2012, he was the director of research and managing editor at the Ottawa-based Macdonald-Laurier Institute and prior to joining the MLI, Mr. Clemens spent a little over three years in the United States with the San Francisco-based Pacific Research Institute. He has published over 70 major studies on a wide range of topics, including taxation, government spending, labor market regulation, banking, welfare reform, health care, productivity, and entrepreneurship. He has published over 300 shorter articles, which have appeared in such newspapers as The Wall Street Journal, Investors Business Daily, Washington Post, Globe and Mail, National Post, and a host of U.S., Canadian, and international newspapers. Mr. Clemens has been a guest on numerous radio and television programs across Canada and the United States. He has appeared before committees of both the House of Commons and the Senate in Canada as an expert witness and briefed state legislators in California. In 2006, he received the coveted Canada’s Top 40 Under 40 award presented by Caldwell Partners as well as an Odyssey Award from the University of Windsor. In 2011, he was awarded (along with his co-authors) the prestigious Sir Antony Fisher International Memorial Award for the best-selling book The Canadian Century. In 2012, the Governor General of Canada on behalf of Her Majesty the Queen, presented Mr. Clemens with the Queen Elizabeth II Diamond Jubilee Medal in recognition of his contributions to the country.… Read more Read Less… -
Joel Emes
Senior Economist, Fraser Institute
Joel Emes is a Senior Economist, Addington Centre for Measurement, at the Fraser Institute. Joel started his career with theFraser Institute and rejoined after a stint as a senior analyst, acting executive director and then senior advisor to British Columbia’s provincial government. Joel initiated and led several flagship projects in the areas of tax freedom and government performance, spending, debt, and unfunded liabilities. He supports many projects at the Institute in areas such as investment, equalization, school performance and fiscal policy. Joel holds a B.A. and an M.A. in economics from Simon Fraser University.… Read more Read Less… -
Niels Veldhuis
President, Fraser Institute
Niels Veldhuis serves as President of the Fraser Institute, Canada’s most influential think tank.In his over 20-plus-year career in publicpolicy, Niels has authored six books and more than 50 peer-reviewed studies on a wide range of economic topics. In 2011, he was awarded (along with his co-authors) the prestigious Sir Antony Fisher International Memorial Award for the best-selling book, The Canadian Century.Highly regarded for his opinions and perspectives on major economic and social issues, Niels appears regularly in the media across Canada and the United States. He has written hundreds of commentaries that have appeared in over 50 newspapers, including the Globe and Mail, Wall Street Journal, National Post, and The Economist.Known for his ability to explain matters of economics and government policy in a down-to-earth and easily understood manner, Niels travels widely across North America. His speaking engagements extend to diverse audiences, including business groups, corporate gatherings, community organizations, and students.Niels has had the privilege of sharing the stage and moderating discussions with prominent business and political leaders from around the world. Notable individuals include Prime Minister Stephen Harper, Prime Minister Brian Mulroney, and BC Premier Gordon Campbell. He has also moderated discussions with distinguished Canadian journalists such as Chantal Herbert, Andrew Coyne, and Rex Murphy, as well as diplomats such as Canada’s Ambassador to China and Israel’s Ambassador to Canada. Niels moderated a discussion between United States Presidents Bill Clinton and George W. Bush in 2011 and has facilitated conversations with impactful authors like Mosab Hassan Yousef (author of "Son of Hamas") and Lord Conrad Black.Niels Veldhuis is an alumnus of Simon Fraser University, was one of Vancouver’s Top 40 under 40 by Business in Vancouver in 2010, and is a member of the Young Presidents’ Organization (YPO).… Read more Read Less…
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