Martin touts `social enterprises’: Former PM urges tax incentives to spur investment when bottom line is community’s good

November 8, 2007

Toronto Star

Bruce Campion-Smith
Ottawa bureau chief

OTTAWA-Canada’s tax system needs be changed to encourage investors to pump money into “social enterprises” – a new breed of businesses that have community good rather than pure profit as their bottom line, says former prime minister Paul Martin.

Canada has “barely scratched” the potential of the charitable sector to help Canadian society – and its economy – and outdated tax laws are partly to blame, Martin will tell a Toronto audience today.

“There are many investors who would put their money into social enterprise, if the vehicles and incentives were there,” Martin will say at the Munk Centre for International Studies, according to a copy of his remarks obtained by the Toronto Star.

Different from charities, he says, social enterprises trade in goods and services and make money, though financial returns are often lower than traditional businesses. “Their major return on investment is calculated by their social or environmental return,” he says.

Tax incentives are needed to promote such enterprises, Martin says. “What we have to do is make it possible for social entrepreneurs to tap capital markets the same way their business counterparts can do.”

Martin says the charitable sector is an unrecognized part of the economy, contributing 8 per cent of the country’s gross domestic product.

“Without the work of Canada’s charities and non-profits we would be a much poorer society, morally and economically,” Martin says.

The former prime minister will cite the example of Eva’s Phoenix Print Shop in Toronto, which offers shelter and on-the-job training for young people who have suffered abuse or family breakdowns.

“The print shop is now ready to expand its ability to help more young people but needs additional capital to do so,” he said.

If Ottawa can provide tax incentives to spur business entrepreneurs, “why would we not provide similar incentives to social entrepreneurs as they seek to tap capital markets for the betterment of society,” Martin says.

In Britain, “Community Interest Companies” provide tax incentives for firms that operate to benefit the community “rather than purely private gain.” In two years, 1,200 new businesses have been created under a new law.

Martin says he took some steps on the issue when he was finance minister and prime minister but admits now he didn’t go far enough.