Level the playing field for social entrepreneurs, says Martin
Former prime minister calls social enterprise sector to action
Thursday November 19, 2009 -- Camille Jensen
TORONTO – Social enterprise should receive the same types of financial advantages as regular business while allowing them to fill their social mission, says former Canadian prime minister Paul Martin.

Martin addressed delegates during the opening night networking event of the third Canadian Conference on Social Enterprise Nov. 18 at the Centre for Social Innovation. Martin is a long-time advocate for social enterprise, which provides a social good through a business model.

He argues that current Canadian tax law is unable to accommodate the emerging social enterprise sector and needs to change.

For example, non-profit and charitable organizations, which do not have profits as their primary goal, have to rely on fundraising in order to expand. If they make a profit, they no longer qualify for charitable status.

While a social enterprise can make a profit, attracting capital is difficult because returns are often below full-market investment due to their social mission, he says.

Social enterprises that are for-profit are in a new middle ground, unable to offer charitable deductions as they are not a charity or non-profit, yet offering lower return to investors.

If social enterprises are going to succeed they need to have a legal structure, which includes tax incentives that will allow them to bridge this gap, says Martin.

“What the social entrepreneur does is fill gaps. Governments are prepared at any instance to fill gaps with exchanges in the tax act and what I am saying is I see no reason why if you are dealing with social entrepreneurs who are filling the gaps of the social fabric that government could never do and never emulate, for God’s sake to recognize that as a business enterprise,” he says.

Lucky for Canada, both the United States and the United Kingdom offer examples, according to Martin. For instance, the U.K. legislated the creation of Community Interest Companies (CICs), a new form of business that have a purpose to benefit the community rather than purely private gain.

The U.S. has created a low-profit Limited Liability Company (LLC), allowing investors to invest in socially beneficial, for-profit ventures while simplifying compliance with tax rules.

“There is no reason why the types of structures that have been developed abroad could not be developed here,” says Martin, adding he thinks both could be improved.

Martin ended his presentation with a call to action to the social enterprise sector. Among his recommendations, he suggests  broader education to the public about social enterprise, choosing either the federal or provincial government to present strong lobbying efforts and keeping the message simple.

“Give us a level playing field is a pretty simple message,” says Martin.

Martin’s speech was a kick off to the conference sessions on building a national policy agenda for the social enterprise sector. These sessions, according to Martin, brings together “some of finest policy minds” in the country.

To learn more about the third annual Canadian Conference on Social Enterprise click here.

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