Canada must look beyond regulatory fixes and needs to explore tax changes to help de-risk investment decisions in early stage businesses to help steady the economy in the face of U.S. headwinds, according to a new campaign that launched on Tuesday.

The Canadian Council of Innovators and the Canadian Venture Capital and Private Equity Association are partnering together in Bet on Canada, a campaign calling for targeted tax reforms to “strengthen Canada’s capacity to build, finance and retain globally competitive companies.”

The campaign calls for the creation of a “more meaningful” Canadian Qualified Small Business Stock-style incentive, and the introduction of a capital gains rollover to make it easier for entrepreneurs and investors to reinvest proceeds from one qualifying Canadian business into another.

Patrick Searle, CEO of the Council of Canadian Innovators, said that would mean retooling the capital gains exemption for investors to better match Canada’s global counterparts.

Right now, Canadian investors have a lifetime exemption of $1.25 million, and any additional proceeds are taxed at the rate for capital gains. In the U.S., there’s a $10 million exemption per investment — known as an event.

“That encourages you to place bets on more than one time, and it rewards the the risk of putting money into a company that might not, and most don’t like that’s the needle in the haystack,” Searle said in an interview.

“But for those that have that risk appetite, we shouldn’t have a disincentive for them to put the money to work in Canada.”

While the campaign hopes for the Liberal government to make these tax changes in the upcoming fall budget, Searle said this has been a constant ask from the business community over the past years.

He said investors want the government to revive and improve an axed plan from the 2024 budget to create an “Entrepreneurs’ Incentive” to reduce the inclusion rate to 33.3 per cent on a lifetime maximum of $2 million in eligible capital gains. That plan would grant entrepreneurs a combined full and partial exemption of at least $3.25 million when selling all or part of a business.

The incentive would have also resulted in a one-third inclusion rate, and the limit will increase by $200,000 each year, starting in 2025, until it reaches $2 million in 2034.

But it was never fully rolled out and cancelled in the 2025 budget.

Searle said now is the time for the government to act.

“We’re two years… into a trade war where we’re competing for capital and talent, so we’re not competitive. So, this is about getting competitive,” he said.

“If we want the same money to go into our projects, we should also compete to see that same money go into our companies.”

Finance Minister François-Philippe Champagne is expected to table the budget next month, but it could happen earlier or later.