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Capital gains increase stifles innovation, Shopify’s leaders say

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Top leaders at Canadian e-commerce company Shopify have ripped the federal government’s plan to increase the capital gains tax rate, arguing it will have an anti-innovation effect.

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On Tuesday, the governing Liberals announced in the 2024 federal budget that the rate on capital gains would increase from 50% to 66% for people making $250,000 or more, as well as all corporations and trusts.

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The increase is to help pay for the government’s new policy initiatives toward building more housing for younger people shut out of home ownership.

However, that increase — while only affecting 0.13% of Canadians — would stifle innovation and investments in Canada by people with the means to do so, Shopify’s leaders argue.

“Message from a friend: ‘Canada has heard rumours about innovation and is determined to … leave no stone unturned in deterring it’,” was the sarcastic response on social media site X from Tobias Lutke, Spotify CEO, on Tuesday.

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“What. Are. We. Doing. (Canada)?!?” added Harley Finkelstein, the company’s president, shortly after the budget was announced in the House of Commons.

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On Wednesday, Finkelstein warned that the government’s policies will be a failure in Canada and represents a golden opportunity for investors south of the border.

“We need to be doing everything we can to turn Canada into the best place for entrepreneurs to build (Canada),” Finkelstein wrote.

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“What’s proposed in the federal budget will do the complete opposite. Innovators and entrepreneurs will suffer and their success will be penalized — this is not a wealth tax, it’s a tax on innovation and risk taking.

“Our policy failures are America’s gains. At a time when our country is facing critically low productivity and business investment our political leaders are failing our country’s entrepreneurs.”

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