2018 Ontario Budget Submission
Hon. Charles Sousa
Minister of Finance
Government of Ontario
22 January 2018
Small and medium scaling enterprises in Canada employ over 70% of our labour force. They are the economic engines of our country and provide critical infrastructure that drive our prosperity, acting as a backbone of our communities. 47% of new jobs in Canada are created by domestic high-growth, scaling firms and 46% of Canada’s GDP is generated by scaled, large firms.
As the fastest-growing job and wealth creators in our province, Canadian technology firms require the wind of government at their backs as they compete globally for the talent, capital and customers they need to scale-up; Ontario’s sustained economic growth and long-term prosperity depends on it.
The Council of Canadian Innovators is a business association established by the leaders of Canada's fastest growing and most promising innovative firms. Our mandate is to grow Canada’s economy by advocating for policies that help high-growth companies scale up in Canada and abroad so that they can bring prosperity to our country.
Innovation experts say that one essential element in sustained regional growth is the presence of significant concentrations of homegrown high-growth scale-ups. Companies that scale from millions to billions provide the most returns to national economies. Domestic, high-growth companies provide critical public and private wealth that helps Ontario and Canada generate the new revenues it desperately needs.
Canadian innovators who are running high-growth, Ontario-based companies are looking for measures in Budget 2018 that address the barriers to scale that exist within our domestic innovation ecosystem. Our members would welcome measures targeted towards:
- Shrinking Ontario’s high-skilled labour gap;
- Improving access to government programs that invest capital into market-proven technologies;
- A stronger model for procurement and co-development with the government;
- Updating Ontario’s digital policy infrastructure, including introducing an Ontario Data Strategy;
- Creating an advisory council for Premier composed of high-growth domestic CEOs, and;
- Keeping personal income taxes competitive.
In 2017, the Government of Canada introduced its Global Skills Strategy, which shortened the amount of time it takes for a highly-skilled worker outside of Canada to obtain a work visa, if they have a job offer from a high-growth Canadian-based company. The impact of this policy change was tremendous: the government reduced the processing times from twelve months to just fourteen days. This change signaled to innovators that the federal government was committed to finding ways to increase Canada’s talent pool and help high-growth firms scale-up.
For the provincial government to send a similar signal, we recommend that 10% of the amount of immigrants Ontario welcomes annually through the Provincial Nominee Program be set aside for highly-skilled workers. An introduction of a dedicated talent stream for workers with unique and in-demand skills would help both address the skills shortage in Ontario and help innovators identify and quickly hire the employees they need to scale their firms up.
In the twenty-first-century global economy, governments that work hand in glove with their home-grown innovative companies are seeing the greatest economic returns for their efforts. The role of government in helping companies scale up in the innovation sector should not be misunderstood as one where the government is giving handouts to companies that could simply go it alone. The innovation economy is created, managed and regulated by the government because technology entrepreneurs create and sell intellectual property (IP).
Too often in Canada, public discourse is dominated by proponents of traditional economies who argue that government has to get out of the way of business. This view is both perilous and inadequate for the twenty-first-century economy driven by innovation, specifically the commercialization of IP. While the hands-off approach has worked well for traditional industries, it does nothing for entrepreneurs creating and extracting wealth from IP.
We recommend that a greater focus of Budget 2018 be placed on helping home-grown innovators become global players by investing in market-proven technologies. Specifically, we would like the government to invest more of its Jobs and Prosperity Fund into domestic firms that are already successfully commercializing intellectual property and doing sales around the world. By helping homegrown firms expand their operations and develop more innovative technologies, these firms will ultimately send more wealth and tax revenues back to the province’s coffers to support the important social programs residents of Ontario rely upon.
Government procurement procedures can often be antiquated, not innovative, and for scaling companies, an opportunity shrouded in bureaucracy not worth pursuing. A more agile, adaptive and modern procurement process would instill confidence into the domestic innovation community that the provincial government is serious about doing business with Ontario firms – and buying Canadian-made technology services to solve Canadian challenges.
In 2017, innovators welcomed the launch of Ontario’s Small Business Innovation Challenge (SBIC), which recognized the role government can play in building an innovation-driven economy. A year later, the program has only produced two challenges which domestic innovators could participate in. In Budget 2018, Canadian innovators are looking for more proof-of-concept and co-development opportunities with the provincial government.
To grow the province’s innovation outputs and help homegrown companies access new customers, Ontario should introduce its own version of Ottawa’s Innovation Solutions Canada (ISC), which mandates that government departments set aside a percentage of their procurement budgets to buy from small and medium-sized domestic firms. Ottawa’s program is modeled closely after the U.S. Government’s Small Business Innovation Research (SBIR) Program, which reserves 3% of government Research & Development funds for scaling businesses, helping them grow and compete on the same level as larger businesses. A new modernized procurement program in Ontario would go much further than the current SBIC program by helping high-growth firms access new customers, develop new technologies that can be exported globally, and sell abroad with new confidence, having been validated by their home government.
Updating Ontario’s Digital Policy Infrastructure
In Budget 2018, Innovators are looking for signals from the Ontario Government that they are serious about making investments in the future of today’s Data-Driven Economy (DDE) and Knowledge-Based Economy (KBE). Because global commerce today is digital/electronic in nature, traditional 19th and 20th century infrastructure (i.e. roads, bridges, free-trade agreements) do not apply to digital businesses.
Instead, what is relevant and critical to modern innovators is a Provincial Data Strategy, intellectual property (IP) strategies, and a strong economic understanding of the impact Foreign-Direct Investment has on the domestic technology sector. A plan to update the policy infrastructure needed to drive Canadian innovation outcomes and support Canadian tech would best be guided by an advisory council of domestic technology CEOs and experts. We propose that a Premier’s Advisory Council of Digital Industries (PACDI) composed of CEOs be struck as soon as possible, to create a forum for the exchange of information, the tackling of modern digital challenges, and the development of strategies to advance economic prosperity for the digital ecosystem.
Keeping Ontario Competitive
Finally, as Canadian innovators compete against major technology giants around the world to attract and retain the brightest talent they need to scale-up their firms, consideration towards the current rate of personal income tax in Ontario – and its impact on economic competitiveness in attracting talent – must be given. For Ontario to be a global leader in digital innovation, policies that make the province a more attractive and affordable place to work, relocate to and grow a business in must be in place. Due to the intangible nature of digital industries compared to the resource-based sectors, technology companies and their intangible assets can be easily moved overnight to jurisdictions with more affordable costs of living, greater talent pools and lower corporate and personal income taxes. Government decision makers must be mindful that as they adjust tax measures while enacting new spending priorities and broader social programs, the revenues these initiatives heavily depend on will be generated by the very scale-ups that could leave Ontario if the cost of doing business here increases.
Budget 2018 presents the government with a bold opportunity to support its domestic innovators who are creating high quality jobs and prosperity for Ontario. Measures that increase access to talent, capital and customers, as well as send signals that the government is serious about implementing a provincial data strategy and more modern digital policy infrastructure, would demonstrate to CEOs across the technology ecosystem that the province is invested in their success.
The innovative spirit is strong within Ontario’s technology CEOs, and the time is ripe for a major shift in economic thinking by the Government of Ontario when it comes to supporting innovators. We look forward to Budget 2018 supporting Ontario’s fastest-growing companies scale-up both here and around the world.