Registered Venture Capital Plans: Fixing Canada's Entrepreneurship and Scale-Up Crisis

Canada faces a systemic failure to allocate sufficient venture capital to new enterprises and to scale existing businesses. This deficit manifests as declining business formation, a persistent scale-up gap, and chronic underinvestment in high-growth, capital-intensive technology relative to U.S. and OECD benchmarks. While Canadian households and institutional funds hold vast liquidity, existing policy structures fail to channel this private risk capital into early-stage ventures. This paper evaluates prominent international venture capital tax frameworks—including the U.S. Qualified Small Business Stock (QSBS) program, the U.K. Enterprise Investment Schemes (EIS/SEIS), France’s PEA-PME, and Italy’s PIR—to design a novel domestic intervention: the Registered Venture Capital Plan (RVCP). Executed by modernizing and expanding Section 44.1 of the Income Tax Act, the RVCP establishes tax-deferred accounts targeting startups with gross asset thresholds under $200 million. The framework introduces shorter holding periods than international precedents, tiered tax-deferral schedules, and institutional oversight via financial custodians. Macroeconomic modelling demonstrates that the RVCP would stem the outbound migration of high-growth Canadian enterprises (the "Delaware Flip") and mobilize retail and institutional capital. It would address Canada’s scale-up gap, colloquially known as the Series B "Valley of Death" for startups. Furthermore, by utilizing financial institutions rather than bespoke legal mechanisms, the RVCP achieves economies of scale that lower transaction costs, enhance tax compliance, and ultimately catalyze long-term national productivity, economic growth, and domestic intellectual property creation. The paper's conclusions offer a scalable blueprint broadly applicable across OECD economies.