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OTTAWA — A Montreal-based think tank says entrepreneurship in Canada has been declining for decades, with the trend worsening in recent years due to tax policy, regulation and government intervention in capital markets.
A new report from the Montreal Economic Institute points to a drop in the number of self-employed workers with employees, a key measure of entrepreneurship. The figure fell from about 867,000 in 2005 to roughly 716,000 in 2025, a decline of nearly 18 per cent despite population growth.
The report also highlights a slowdown in new business creation, with startups accounting for 12.3 per cent of active businesses in 2023, roughly half the rate seen in the early 1980s.
The study links the decline to a series of federal policy changes, including higher marginal tax rates, increased regulatory requirements and expanded government involvement in venture capital.
It says tax changes introduced since 2016, including the creation of a new top income bracket and proposals affecting private corporations and capital gains, have discouraged risk-taking and business formation.
The report also points to a rise in regulatory burden, noting federal regulations increased by 37 per cent between 2006 and 2021. It cites data suggesting businesses now spend hundreds of millions of hours annually complying with administrative requirements.
In addition, the study raises concerns about the role of public funding in venture capital markets, arguing that government-backed investments can crowd out private capital and may underperform in terms of innovation and economic returns.
The report notes that public and para-public sources accounted for a growing share of venture capital investment in some regions, including Quebec, where such funding represented more than 40 per cent of the total in recent years.
The institute argues that reversing the decline in entrepreneurship will require reducing tax and regulatory pressures and shifting toward a more market-driven investment environment.
It says Canada has the capacity to support a stronger entrepreneurial sector, but policy changes will be needed to encourage business creation and long-term economic growth.
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