For Immediate Release
August 29, 2005

TORONTO - The Ontario government announced today that it plans to eliminate its 15 per cent tax credit for investors in Labour Sponsored Investment Funds (LSIFs) no earlier than the end of the 2005 taxation year.

“The LSIF tax credit was introduced when there was a need to kick-start the venture capital sector in Ontario," Finance Minister Greg Sorbara said. "Ontario's venture capital market is much healthier now, and we believe that this incentive is no longer the best fit in today's economic and fiscal climate.”

A healthy venture capital market is important to promoting innovation and research, a priority of the McGuinty government. Ontario's venture capital market includes more than 200 private sector venture capital funds, and close to 200 U.S. funds have invested in Ontario companies over the past six years.

The McGuinty government's commitment to promoting innovation and research, and supporting an environment that encourages business investment and job creation, includes:

• A new Ministry of Research and Innovation, led by the Premier
  
  
• A new Research Council of Ontario to co-ordinate public research and commercialization opportunities, and promote Ontario as a research centre
  
  
• A $27 million Ontario Research Commercialization Program to help public research institutions attract early investment
  
  
• A $36 million Ontario Commercialization Investment Fund to help encourage investment in new technology companies
  
  
• $10 million to support the establishment of the McMaster Innovation Park in Hamilton
  
  
• $6.5 million over three years for the new Medical and Related Sciences (MaRS) Discovery District to help market new Ontario technologies to the world.

The provincial government announced in its first Budget an on-going examination of tax expenditures to ensure that they continue to provide the maximum benefits for the people of Ontario. The province will introduce legislation that would, if approved, eliminate the LSIF tax credit no earlier than the end of the 2005 tax year. The federal government continues to offer its own tax credit for labour-sponsored venture capital corporations.

“Investors continue to have the option to invest in labour sponsored investment funds,” Sorbara said. “Our proposal would simply end the added Ontario incentive. To assist with an orderly exit, we will consult with the LSIF industry over the next three weeks on rules that will help fund managers manage their portfolios, while ensuring that government spending is directed to priority areas.”

Contact: Ministry of Finance Information Centre 1-800-263-7965 Toll-Free (Canada/U.S.)