'We recognize it's a very challenging time': Minister insists budget won't blunt innovation

Despite significant criticisms from business owners and entrepreneurs that parts of the federal government’s latest budget — specifically changes to taxes on capital gains — will stunt innovation, Small Business Minister Rechie Valdez insists it won’t.

“We recognize it's a very challenging time,” Valdez told CTV’s Question Period host Vassy Kapelos, in an interview airing Sunday.

She added that the goal of the latest budget is to “create fairness for every generation,” citing other budget priorities, namely building up housing stock.

“To be able to increase the cost of affordability in this country, we've introduced measures to help support small- and medium-sized businesses across the country,” she continued, pointing to changes to the lifetime capital gains exemption as an example.

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Included in the newly tabled federal budget is a proposed change to the capital gains inclusion rate, which the government estimates will affect a narrow group of high-earning individuals and about 12 percent of corporations.

The Liberals plan to increase the taxable portion of capital gains from half to two-thirds for all corporations, and for individuals with a capital gains above $250,000. That tax increase is expected to generate $19.3 billion in revenue over the next five years.

But several Canadian business owners and entrepreneurs are warning that the change could blunt innovation.

Shortly after the budget was unveiled, Shopify president Harley Finkelstein took to X — formerly Twitter — to voice his concerns.

“Innovators and entrepreneurs will suffer and their success will be penalized — this is not a wealth tax, it's a tax on innovation and risk taking,” he wrote.

“At a time when our country is facing critically low productivity and business investment our political leaders are failing our country's entrepreneurs,” he added.

The heads of both the Council of Canadian Innovators and the Canadian Venture Capital and Private Equity Association have also issued similar warnings.

During a speech in Halifax last month, Bank of Canada Senior Deputy Governor Carolyn Rogers discussed Canada’s “productivity problem,” calling it “an emergency.”

She also cited Statistics Canada data showing that despite a “small gain” at the end of last year, the country has seen declining productivity for the last six straight quarters.

When pressed on why Canadians should trust the Liberals to incentivize innovation and productivity — especially at a time when a senior Bank of Canada official is calling the country’s low productivity level "an emergency" — Valdez said her party has implemented several measures to help small- and medium-sized businesses.

“We're going to continue to invest in our entrepreneurs across the country, and of course, make it a more inclusive environment for them to be able to do so,” she said.

When further pressed on the Liberals' record, considering the number of self-employed Canadians has been steadily declining since the beginning of the COVID-19 pandemic, Valdez didn’t directly address the statistic.

Valdez listed tax cuts for some businesses and initiatives to encourage women to enter the workforce, such as the $10-a-day childcare program.

“I've met with many small- and-medium sized businesses across this country, and I've had conversations with them,” Valdez said instead. “They are looking to start their business and we're trying to encourage, and be able to do so by different measures to create a more inclusive environment for entrepreneurs."

“So I do believe there is a lot of interest there,” she also said. “And we're going to continue to encourage and support small businesses across this country.”

With files from CTV’s Question Period Senior Producer Stephanie Ha