Shopify CEO says feds plan to tax stock options will hurt startups

MONTREAL -- The CEO of one of Canada's up-and-coming tech companies is calling on the federal government to abandon its plan to expand taxation of stock options, saying the move will make it more difficult for startup firms to attract talent.

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Tobi Lutke said the Liberal proposal would have it more difficult to launch his Ottawa-based e-commerce company, Shopify.

"I think the Liberals should abandon this because it fosters innovation," the 35-year-old entrepreneur said in an interview Thursday.

"It would have been harder to build Shopfiy with the taxation being the way that it's proposed," he said in an interview.

During last year's federal election campaign, the Liberals promised to cap how much can be claimed through stock option deductions. The party said employees with up to $100,000 in annual gains would be unaffected, a move it said would protect startups.

Finance Minister Bill Morneau recently said he will soon release details about the commitment. The government is expected to release its first budget in mid-March.

Lutke said the government promised during meetings with senior ministers and other officials to grandfather existing options.

He said many people took massive pay cuts to join his company several years ago in exchange for options to purchase equity. While the business is now mature enough to survive the changes, Lutke said it could have a disastrous impact on younger startups.

Lutke also criticized proposed intellectual property clauses in the Trans-Pacific Partnership, joining others in the tech sector including Blackberry founder Jim Balsillie who have said the deal will undermine Canada's autonomy to adopt its own software patent rules.

Despite the government's promise of public consultations, Lutke believes Ottawa has little choice but to ratify the 12-country trade deal it inherited.

"I think it's a lost fight already. The moment the documents were publicly accessible this was on a one-way train towards ratification."

Lutke made his comments as he opened a new office in Montreal aimed at expanding research and development with 150 new positions.

While Shopify continues to grow its revenues, Lutke said it will focus on taking advantage of opportunities to grow before posting profits late next year.

"We think Canada needs a tech company of the size that America produces and that's what we are aiming for," Lutke said.

Shopify provides services to more than 243,000 small- and medium-sized customers in 150 countries. It has more than 1,000 employees working at offices in Montreal, Toronto, Ottawa and Waterloo, Ont.



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