The Nova Scotia government delivered half a reform on its equity tax credit last week, and it will be interesting to see what the other half of the reform will entail in a few months.

Don’t get me wrong. Last week’s announcement was a welcome step forward – something I’ve long called for in this column. The government says there are more changes coming, and I suspect they will be announced hand-in-hand with the other three Atlantic Provinces to harmonize investment tax credits across the region.

The main thing to watch for is whether the credits can be used by investors outside the region. That could have a huge impact in attracting investment to the fastest growing segment of the Atlantic Canadian economy. Our research in 2017 found that Atlantic Canadian startups are growing revenue by a weighted average of 75 percent annually. (I know plenty of startup founders who say this isn’t fast enough.)

The government said last week its new Innovation Equity Tax Credit will apply to investments in approved companies of up to $250,000, up from $50,000. Investors will receive a credit equal to 35 percent of their qualifying investment, or 45 percent in the priority sectors of oceans technology and life sciences.

The statement added: “The province is also exploring options to expand the tax credit through legislation this spring. Those options include making corporations and qualified venture capital funds eligible for the credit.”

So we know two things are likely coming. By allowing corporations to claim the credit, it means Nova Scotians could efficiently invest in startups through their family businesses, rather than by withdrawing money, paying income tax and then investing as individuals.

Singling out VC funds is intriguing. There are now only three such funds based in Nova Scotia, and one (Innovacorp) is owned by the provincial government. The fact that VCs are even mentioned suggests that the policy will be extended to more than this trio of funds.

I believe the big opportunity is to make the credits available to investors outside the region. That could be done just by writing cheques for the tax credit to investors outside the region (which is the policy in Minnesota). Or the credits could be transferrable, so come-from-away investors could sell their tax credits to people who pay income tax in Atlantic Canada (a model used in Arkansas).

The reason: the demand by Atlantic Canadian high-growth companies for capital is greater than the pool of Atlantic Canadians who can invest $250,000 year after year. What’s more, studies have shown that tax credits for high-growth companies actually increase government revenue over time.

More is being done to increase investment from external angel investors in these companies. Bob Williamson of Invest Atlantic has been working with startups to court Ontario investors, and the National Angel Capital Organization is becoming more active in Atlantic Canada.

It would be great if Atlantic Canadian entrepreneurs could meet investors outside the region and offer them a company that is growing by 75 percent or better annually and a tax credit to reduce the investment risk.