Canada’s tech sector is up in arms over the federal government’s budget, which proposes raising the capital gains tax rate to two-thirds from one-half on earnings above $250,000 annually.
The move, aimed at the “wealthiest 0.13%” to generate $19.3 billion over five years, has drawn fierce criticism from innovation leaders who warn it could drive entrepreneurs and talent out of the country.
Benjamin Bergen, president of the Council of Canadian Innovators, said his “phone was exploding” with dismayed reactions from across the industry after the budget’s release. The core concern is that higher taxes on cashing in stock options and other capital gains could dissuade people from pursuing riskier career paths in startups versus traditional jobs.
Shopify, one of Canada’s tech giants, lambasted the proposal, with president Harley Finkelstein calling it “a tax on innovation and risk taking” that will benefit the US. Hundreds of companies signed an open letter to Prime Minister Trudeau and Finance Minister Freeland urging them to “scrap this disastrous tax hike on investment.”
The venture capital community joins the opposition, with Kim Furlong of the Canadian Venture Capital and Private Equity Association saying she was “baffled” by a measure that will “dampen Canada’s entrepreneurial spirit” and impact job creation. She vowed to lobby intensely against it.
While aimed at the ultra-wealthy, critics argue the capital gains increase could diminish the appeal of stock compensation for mid-career hires like marketers and legal experts that startups need. The government counters it’s creating fairness for younger Canadians struggling with costs.
It has also been criticized by Trudeau’s former finance minister and a former governor of the Bank of Canada, who called it “the worst [budget] since 1982.”
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One Response
Cry about it.