A rchive Date
[ 18-02-2002 ]
Category
[ International Relations ]
sub-Categoy
[ Canada ]
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[http://www.canoe.ca/Columnists/brodbeck.html
Gov't-subsidized funds a ripoff
By TOM BRODBECK -- Winnipeg Sun
February 18, 2002
The flap over the Crocus Investment Fund last week should be a stark reminder to us that government has no business subsidizing investment funds.
The Opposition Tories got caught with their pants down after making false allegations against Crocus and then quickly reversing their stance. They screwed up in a big way. And their incredibly bad judgment demonstrates just how far away they are from being a government in waiting.
But it also raises another issue. Why is government in the business of subsidizing venture capital funds in the first place?
You may not know this, but taxpayers doled out $13.5 million in "tax credits" -- a fancy name for a hand-out -- last year to people who invested in Crocus and Manitoba's other government-hatched fund, the Ensis Growth Fund. Every time someone puts $1,000 into one of these funds, they get a free $300 from taxpayers. That's $300 tax-free, by the way, of your money and mine.
Think about that the next time you're shuffling through your unpaid bills, trying to figure out which ones you can delay another month. Government is forcing you to subsidize your neighbour's RRSP when you may not even have a pension plan yourself. Of course, this is all done in the name of promoting local investment. Crocus and Ensis invest exclusively in Manitoba companies. The argument is that it promotes economic growth locally.
But I've never been able to understand how wealth is created when government taxes you, flushes the money through a costly bureaucracy and then redistributes it to a group of small- and medium-sized companies through tax credits. It makes no sense. And it's grossly unfair to those picking up the tab for someone else's RRSP.
No one ever criticizes this stuff because these programs are seen as virtuous attempts by government to promote local investment. In reality, they're nothing more than backdoor corporate welfare schemes. It's not that funds such as Crocus and Ensis aren't good venture capital investment options.
On the contrary. They invest in sound, up-and-coming firms such as Fort Garry Brewing Company and Vansco Electronics Ltd., which have a good chance of providing investors with a decent return. But people should be investing in those companies based on merit, not through government subsidization. Why should some companies get this kind of favouritism and not others?
Most people who invest in the money market, stocks, bonds or mutual funds do not get a tax credit. They assume whatever risk they're comfortable with. And so, too, should venture capital funds such as Crocus and Ensis.
They're high-risk funds and they should be treated as such. It distorts the market to use government money to artificially prop up the returns these companies can provide. If government reduced wasteful spending, such as the $13.5 million it spends on Crocus and Ensis, they would be able to lower taxes and leave more money in the hands of all people to invest, not just a select few.
But I guess that would put too many government bureaucrats out of work.
Tom Brodbeck is the Sun's city columnist. He can be reached by e-mail at tbrodbeck@wpgsun.com Letters to the editor should be sent to editor@wpgsun.com.
 World Fact Book (CIA)]
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