TORONTO — The federal budget has been met with scorn from Canada's innovation industry, including tech darling Shopify, which called the capital gains measures in the fiscal plan a potential source of “irreparable harm.” There is.
The industry is disappointed that the Liberal government's budget tabled on Tuesday includes a proposal to increase the proportion of capital gains income that businesses pay income tax from one-half to two-thirds. There is.
The increase also applies to individuals with capital gains income of more than $250,000 per year and will go into effect on June 25.
The increase will affect only 0.13% of the richest people, and is expected to generate $19.3 billion in income over the next five years. However, the proposal was met with disappointment from the technology industry, which derided the change.
“I've had messages on my phone from leaders across the country saying, 'This is a nightmare. We have to fix this. They don't know what they're doing.'” said Benjamin Bergen, Chairman of the Innovators Industry Council of Canada. the group said Wednesday.
At the heart of the complaint he filed is that the potential changes would encourage entrepreneurs to open businesses elsewhere and force workers in the field to avoid paying further taxes when making profits with stock options. There was a feeling that it would push the country away from Canada.
“If taxes and capital gains are so punitive that it doesn’t make sense for someone to either stay in the country or choose to leave a more traditional job and start a new company. You're taking away (society's) rights. We have the people we need in this country,” Bergen said.
Of the 500 companies surveyed by consulting firm KPMG in 2021, 80% said they needed more people with digital skills, but two-thirds were struggling to find and hire them. I answered. This report was published before artificial intelligence began to boom in the wake of his ChatGPT release in 2022, which will only increase the demand for technology talent.
While the capital gains measure is seen as a way to tax the wealthiest people, Bergen said the budget's content could impact tech workers who are not in senior positions.
“Those who join in the early stages of working on a startup or scale-up will be offered stock options and other benefits that will ultimately be determined as future capital gains,” he said.
“Traditionally mid-level marketing professionals, sales professionals and legal professionals are being completely undermined by these kinds of policy measures that are being introduced.”
Those concerns echoed even at the highest echelons of Canada's technology industry. Several Shopify executives, including President Harley Finkelstein, said “What are we doing? What are we doing?!?” about the capital gains changes X hours after the budget was released. Posted.
“This is not a wealth tax. This is a tax on innovation and risk-taking,” he added on Wednesday.
“Our policy failures are America's interests.”
Tobi Luedtke, CEO of the Ottawa-based e-commerce giant, agreed, saying a friend told him that “Canada has been hearing rumors about innovation and is determined to do everything possible to stop it.” He said he received a message saying, “I'm here.”
Forbes estimates Luedtke's net worth at US$6.4 billion. He has become more vocal in his criticism of federal policy decisions in recent months, and previously chaired the Digital Strategy Table, which hosted Prime Minister Justin Trudeau in 2018.
Meanwhile, the president of the Canadian Venture Capital and Private Equity Association said on LinkedIn that he was “perplexed” by the changes to capital gains.
“This measure, which would effectively tax innovation and risk-taking, would significantly weaken Canada's entrepreneurial spirit, constrain economic growth in key sectors of the economy, and impact job creation,” said Kim Farron. ” he said.
“Policy changes like these undermine Canada's position in attracting the talent needed to grow and scale businesses in Canada.”
Mr Furlong pledged to “work tirelessly to reverse the decision”.
Alison Nankivell, chief executive officer of Toronto's MaRS Innovation Hub, said the reaction to the budget reflected a tug-of-war between equity and economic opportunity.
“In some ways, what I'm hearing from the entrepreneurial community is a sense that the balance may not be where they want it to be in terms of their ability to build businesses,” she says.
The tensions have obscured some of the benefits she saw in the budget in this area.
For example, the government set aside $2.4 billion to increase AI capabilities, with most of it going into a fund to increase access to computing and technology infrastructure.
Nankivell said he's “really pleased” that AI is getting attention and that Canada needs to consider whether it has enough capacity in chip and server farms to power future uses of the technology. He said there is.
Funding will also be allocated to a program in which Ottawa works with the private market to co-invest in promising Canadian companies, and the Financial Consumer Agency of Canada, which will oversee the opening of banking services and shaping the country's approach to virtual currency asset reporting. Established.
This report by The Canadian Press was first published April 17, 2024.
Tara Deschamps, Canadian Press
