Pre-Budget Consultations by The Coalition to Support Investment in Canada

On August 27, 2025, The Coalition to Support Investment in Canada made written submissions in response to the Canadian government’s 2025 pre-budget consultations. The submissions seek to foster enhanced investment of public market capital in small and mid-sized Canadian companies, in an effort to build a resilient Canadian economy and position Canadian companies for success on the world stage. 

The Coalition

The Coalition was formed due to an increasing concern about declining participation by small and mid-sized companies in Canada’s public capital markets, and the negative impact of this decline on Canadian investors and the country’s economy.

Goodmans is a founding member of the Coalition. Other members currently include Canaccord Genuity Group, Ewing Morris Investment Partners, National Bank Financial Markets, Origin Merchant Partners, Pembroke Management Ltd., and Waratah Capital Advisors Ltd.

The Coalition’s Recommendations

As discussed by Goodmans’ Partners Stephen Pincus and Brad Ross in their Globe and Mail article earlier this year – Canada’s stock market is broken and we must fix it – the number of operating companies listed on the Toronto Stock Exchange (TSX) has dropped by more than 35% over the past 20 years and the three-year average number of TSX operating company IPOs has dropped from 40 to less than two per year. 

The lack of healthy domestic public capital markets affects Canadians and the Canadian economy by:

• hindering Canadian businesses productivity and competitive edge;
• forcing Canadian businesses to seek capital elsewhere;
• costing Canada our head offices, human capital and intellectual property; and
• increasing economic inequalities between the wealthiest Canadians, who can invest privately, and average Canadians, who rely on the public markets.

The Coalition believes these problems cannot be fixed by securities regulatory reform alone but also require the federal government to use fiscal and tax policy to drive structural changes.

The Coalition recommended the following proposals to the Canadian federal government:

• Allow for deferral of capital gains tax when a Canadian resident taxpayer sells publicly listed equity securities and reinvests the proceeds in initial public offerings of small and mid-size Canadian companies (CanCo)¹. Capital gains tax would be payable when shares are sold and not reinvested in the IPO of a CanCo.

• Provide an immediate tax credit of $0.25 for each $1.00 of CanCo shares purchased in the market by a Canadian resident taxpayer. The tax credit would be reversed to the extent the shares are sold for proceeds over the $.75 effective cost basis. The Coalition believes this offers a meaningful incentive for retail investors to provide more risk capital to growing Canadian companies.

• Allow for new flow through structures for:

• Growth CanCos (i.e., those that do not yet generate significant cashflow) to flow through loss deductions to Canadian resident shareholders. This structure is already available for Canadian corporations in the mining, oil and gas, and renewable energy and energy conservation sectors.
• Mature CanCos to distribute pre-tax cash flow to Canadian resident shareholders. This is similar to REITs and master limited partnerships, and to income trusts in Canada pre-November 2006.

• Require the Canadian Pension Plan Investment Board (CPPIB) to invest at least 2% of its assets in CanCos.

• A dual mandate requiring CPPIB to generate optimal returns for Canadians while at the same time investing even a small percentage of its assets in CanCos (similar to the dual mandate of Caisse de dépôt et placement du Québec) will allow Canadians to support the growth of CanCosand reap the benefit of that growth in their retirement.

• This policy could also give Canadians confidence to make their own investments in CanCos. The government should literally put more of our money to work in Canada.

• Allow accelerated tax deductions for IPO costs for CanCos.

• IPO costs are currently deductible over five years. Making the deduction fully available for CanCos in Year 1 (or as soon as the company can use it within five years) will provide CanCos with additional capital to reinvest in their businesses in the critical early stages of growth.

• Allow accelerated tax deductions for capital investments in the first five years following an IPO.
  • Accelerating deductions for capital investments in the initial post-IPO period will provide CanCos with additional capital and allow them to continue to invest in the growth of the business in the critical early stages.
• Provide CanCos with a reduced corporate tax rate for a specified period following an IPO.
  • Providing CanCos with a reduced corporate tax rate in their initial years as a public company will free up capital to grow the business in these critical early years.

The Coalition hopes these recommendations will be implemented to support the growth and success of small and mid-sized Canadian companies through increased access to public market capital.

For further information regarding this Update, please contact the author or any member of our Capital Markets Group.

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¹ CanCo is defined in the submissions more specifically as operating Canadian public companies (incorporated and headquartered in Canada) with a market capitalization of C$100 million - C$1.5 billion listed only on a Canadian Exchange.