Major Industry Group calls for Stock Option Course Correction: Proposed Changes Wrong Path to Attract & Keep Best Talent in Canada
November 9, 2015

Changing the stock option dynamic negatively affects the Canadian startup business climate, at a time when our community is looking for all ways to move Canada to number one ranking for innovation and competitiveness. (CATAAlliance)

Ottawa, ON...CATAAlliance (www.cata.ca) a recognized champion of Canadian innovation and entrepreneurship has called on the new Liberal Government to reconsider increasing taxes on employee stock option benefits by limiting Canadian resident employees from claiming the stock option deduction in respect of option benefits in excess of $100,000 annually as part of helping to advance Canada's innovation and competitiveness ranking to number one from middle of the pack.

The platform estimated that the stock option deduction cost the Canadian government $750 million in 2014. However, it failed to account for the fact that employers generally forgo a tax deduction where employees are entitled to the stock option deduction. This effectively allows stock options to be taxed in a manner similar to capital gains.

It is unclear whether this would apply to just non-CCPCs (Canadian-Controlled Private Corporations), or both CCPCs and non-CCPCs.

CATA CEO, John Reid said, "Changing the stock option dynamic negatively affects the Canadian startup business climate, at a time when our community is looking for all ways to move Canada to number one ranking for innovation and competitiveness. Such a change in Canada's stock option dynamic would make it more difficult to attract and keep the talent enterprises need to drive forward innovation and commercial success."

Reid added, "And that talent challenge also applies to attracting and keeping best CEO's because stock options make up for lower Canadian compensation levels compared to U.S. peer firms. Having options taxed at 50 percent can bridge that compensation gap with earnings invested back into the economy in areas such as angel investing to consumer purchases."

DOWNLOAD WHITEPAPER

Download White Paper on "Will Tax Treatment for Canadian Stock Options Change?"
(Davies Ward Phillips & Vineberg LLP) at:
https://drive.google.com/file/d/0B__wzrAC_E12d0NOcXRlRXRudlU/view?usp=sharing

Houston said, "Employees accept lower compensation rates in exchange for the stock options they receive and thus the potential for valuable equity when the enterprises is successful in the marketplace."

Reid and Houston concluded, "The new government needs to re-evaluate its stock option proposal with regard to the overall impact of implementing any limitation to the stock option deduction, and beneficial value as a resource to attract and keep the talent needed for growing Canada's competitive innovation nation".

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CATA has released a seven-point working agenda for advancing Canada's Innovation and competitiveness rankings. Ideas and guidance were crowdsourced from the CATA Social Media Groups comprising 18,350 opt in members across the nation and in key global markets.

CATAAlliance

The Canadian Advanced Technology Alliance (CATAAlliance) is the largest high-tech association in Canada. Through its "Innovation Nation" advocacy program, CATA is the foundation for commercialization, market research, networking, events, access to other associations, and professional development, across the nation. For further information visit www.cata.ca