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Justin Trudeau, Canada's prime minister, speaks during an interview in Vancouver, British Columbia, Canada, on Wednesday, March 2, 2016. (Ben Nelms/Bloomberg)
Justin Trudeau, Canada's prime minister, speaks during an interview in Vancouver, British Columbia, Canada, on Wednesday, March 2, 2016. (Ben Nelms/Bloomberg)

Stock-option changes could come in Canadian budget, Trudeau says Add to ...

Canadian Prime Minister Justin Trudeau said his government is still considering how stock options should be taxed, suggesting in an interview changes remain on the table and could be revealed in this month’s budget.

“We are going through a very rigorous process of looking at all sorts of different options and alternatives for fiscal measures and others, and we’ll have a lot more to say about it March 22,” Trudeau said Wednesday in Vancouver. “Certainly everything that was in the platform is part of the mix of things we’re considering for this budget,” he said, when asked directly if stock option changes are still a possibility.

Trudeau’s Liberals campaigned on raising C$6.5 billion ($4.8 billion) over four years by making unspecified changes to taxation and spending programs, with stock-option tax treatments cited as one example. The government hasn’t moved on the issue, however, since taking power in November. Executives at startup companies are expressing opposition, saying any changes would affect their ability to attract and retain staff.

‘Big Mistake’

“It would be a big mistake for the government to change its approach to stock options for tech companies,” Rick Nathan, managing director at venture capital firm Kensington Capital Partners, said in an interview Wednesday. The fact Canadian firms pay in Canadian dollars already puts them at a disadvantage, Nathan said.

“Most of the talent that is top quality has a choice,” he said. “They can locate in Canada, they can locate in the U.S. and if the taxes are dramatically higher in one place or the pay is way higher in one place, it has a big impact on many peoples’ decisions.”

Trudeau acknowledged the objections from Canada’s start-up community, and his Liberal Party’s campaign platform said any changes would not affect employees with less than C$100,000 in annual stock option benefits.

“It really matters how it’s implemented, how it’s done,” Trudeau said Wednesday. “And in any measure we put forward, we will be extremely responsible about how it’s going to have the right kinds of impacts and not the wrong impacts.”

Shopify, Hootsuite

Nathan is echoing a refrain the startup community has been repeating since before the election. In September, CEOs from Shopify Inc. and Hootsuite, two of Canada’s best-known tech companies, sent a letter to New Democratic Party Leader Tom Mulcair outlining concerns with the party’s policy on stock options. Mulcair quickly clarified that the policy would make an exception for early-stage tech companies.

Jim Balsillie, former co-CEO of BlackBerry Ltd. and John Ruffolo, who leads the venture capital arm of the Ontario Municipal Employees Retirement System pension plan, have formed a lobby group of quickly-growing tech companies and have been meeting with ministers since the election to express their concerns.

Trudeau is under pressure from his political opposition too.

“This is an example of where policy really matters, and putting a policy like that in place could very well see young people decide to go to Silicon Valley instead,” Conservative Leader Rona Ambrose told Bloomberg TV Canada’s Pamela Ritchie in a March 1 interview.

The stock option changes are part of a review of tax expenditures and programs announced by Trudeau’s predecessor, Stephen Harper of the Conservatives.

Trudeau suggested changes would only be made if they help the middle class. “I am also fairly ruthless whenever it comes to discussing different measures, okay. What is the real impact on the economy and how does this create benefit for the middle class? How does this create long-term growth opportunities for everyone?”

The Globe and Mail Small Business Summit brings together the brightest entrepreneurs in Canadian business to share insights for an inspiring day of keynote talks, workshops and networking. Speakers include Ryan Holmes of Hootsuite, Aaron Zifkin of Airbnb, Harley Finkelstein of Shopify, Bruce Poon Tip of G Adventures and many more. The event takes place on April 26 in Vancouver, April 28 in Calgary and May 3 in Toronto. Click here for details.

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