Ryan Holmes (left), CEO of Hootsuite, chats with Geoff Entress of Pioneer Square Labs at the 2017 Cascadia Innovation Corridor Conference in Seattle, Wash., Wednesday, Sept.13, 2017. THE CANADIAN PRESS/HO-Red Box Pictures-Scott Eklund MANDATORY CREDIT

Tax changes for small business could hamper innovation, tech CEOs say

SEATTLE — The head of one of Canada’s few tech “unicorns” and other industry players are joining the chorus of opposition to Ottawa’s proposed small business tax changes, saying the plan could stifle investment and innovation in a country trying to poise itself as an entrepreneurial hotbed.

“I would encourage the government to look very closely because … it is causing a lot of concern to business owners,” Ryan Holmes, CEO of social media management platform Hootsuite, said in an interview at the Cascadia Innovation Corridor Conference. Hootsuite is among a handful of Canadian tech startups that have reached valuations of $1 billion or more, also known as unicorns.

In mid-July, the federal government released a three-pronged plan to end several tax provisions used by some small businesses. The plan would eliminate income sprinkling, a practice that permits business owners to pass income to family members who are in lower tax brackets.

It would also limit the use of private corporations as a way to gain tax advantages when making passive investments and limit the conversion of a corporation’s regular income into capital gains, typically taxed at a lower rate.

Smaller tech companies have created their own structures — much like doctors, lawyers and other small business owners, who have also rallied against the changes — that provide a different income stream or flow, said Bill Tam, CEO of The BC Tech Association.

For these companies, the proposal creates an additional worry around taxation, he said, adding he’s heard concerns from a few of the group’s 540 members.

The association has encouraged its members to support the Greater Vancouver Board of Trade’s effort to lobby the government to reconsider the changes, he said.

Innovation is a top priority for Ottawa. The buzzword received hundreds of mentions in the budget and the Liberals have committed to $950 million to a supercluster program.

A spokesman for Finance Minister Bill Morneau said Wednesday that the government is committed to supporting “hardworking entrepreneurs” and the changes are not aimed at them.

“We are proposing to address unfair tax planning strategies that allow some wealthy individuals to use corporate structures to shelter income from higher personal tax rates,” he said in an emailed statement.

Some entrepreneurs are not convinced.

The changes could put all streams of funding for entrepreneurs, including personal savings, family support, and angel and institutional investors, at risk, said Jade Bourelle, CEO and co-founder of Talemetry, a Richmond, B.C.-based recruitment firm that uses smart technology.

Budding business people could find themselves in a position in which they will have to give up a greater share of equity in their companies in exchange for funds, and will pay higher taxes if they ever sell the company, he said.

“So why do it in the first place?” Bourelle asked.

If the government wants to have more head offices in cities like Vancouver, Holmes said, that won’t happen by convincing established companies to move to the West coast. A relocation like that involves significant cost, among other issues.

“If we want to get more head offices there, we need to create more Hootsuites,” he said. “I think you need to be very favourable at the small end of the market.”

Those start ups can become big businesses with large, local headquarters.

Hootsuite, which launched in 2008, now employs close to 1,000 people in Vancouver and several offices abroad, according to its website.

While doctors, lawyers, shopkeepers and other who have incorporated their small businesses to lower their tax bill have been speaking out, the tech community has remained largely out of the public discourse.

“It takes a little bit of time for people to understand the impact and I think that’s happening now,” Bourelle said, adding he expects vocal opposition to “ramp up” from lots of different sectors.

Tech firm leaders have been successful in changing the Liberal government’s mind about policy in the past. After discontent from a number of tech firms, Ottawa abandoned a plan to cap how much could be claimed through stock option deductions.

Just Posted

Red Deer College waiting for feds to finalize marijuana legalization

Like businesses, Alberta and municipal governments, Red Deer College is waiting for… Continue reading

Class size only part of the problem say Central Alberta teachers

Though the Alberta auditor general’s report points out that classroom sizes continue… Continue reading

Lacombe County promoting crime prevention measures

County pushing Crime Prevention Through Environmental Design principles

Red Deer doctor concerned about patient transfers to rural hospitals

Family physician says the move creates less incentive for expansion at Red Deer hospital

Fire permit season begins in March

Earlier springs in last few years prompted Alberta government to move up fire permit season

WATCH: Red Deer’s River Bend upgrades officially open

River Bend Golf and Recreation Area is the latest venue to be… Continue reading

How to keep local news visible in your Facebook feed

Facebook has changed the news feed to emphasize personal connections. You might see less news.

In Pyeongchang, maintaining Olympic venues relies on a poor, aging workforce

GANGNEUNG, South Korea - Hockey players from Finland were circling with the… Continue reading

Trudeau’s fashion missteps highlight what not to wear on vacation

TORONTO — The traditional garb that Prime Minister Justin Trudeau and his… Continue reading

Stores make push in scan and go tech, hope shoppers adopt it

NEW YORK — Shoppers at self-checkout lanes scanning all their groceries after… Continue reading

‘Stars seemed to have aligned’ for new Halifax CFL bid, commissioner says

HALIFAX — CFL fans in Halifax have been told the league is… Continue reading

The language of ‘Black Panther’? It’s real. Give it a try.

OTTAWA — The military’s top general has promised to get to the… Continue reading

The language of ‘Black Panther’? It’s real. Give it a try.

JOHANNESBURG — Much of what is seen in “Black Panther” is fictional,… Continue reading

Most Read


Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month