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Canadian tech firms think capital gains policy change will hinder industry: survey

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A new survey of Canadian tech companies reveals 90 per cent of respondents think the federal government’s changes to its capital gains policy will have a negative effect on the industry.

The finding is part of a survey released Thursday of 143 tech leaders conducted by the Council of Canadian Innovators, an organization representing and advocating on behalf of the sector.

The survey adds further to the outcry that came from the highest echelons of the sector as well as the country’s startup community after the federal government presented the change in its April budget.

The hike raises the portion of capital gains on which companies pay tax to two-thirds from one-half (it also applies to individuals on capital gains above $250,000). The change took effect in June but accompanying legislation still has to be introduced and debated, steps expected to happen in the fall.

A spokeswoman for the office of Finance Minister Chrystia Freeland said the government designed the changes to make the tax system fairer while spurring investment.

“With the increased Lifetime Capital Gains Exemption and the new Canadian Entrepreneurs Incentive, a Canadian entrepreneur will be better off with up to $6.25 million in capital gains,” Navpreet Chhatwal said in a statement.

“It is important to note that even with these tax changes, Canada retains the lowest marginal effective tax rate in the G7 and remains below the OECD average.”

CCI’s members feel the change is a detriment to the sector and the country.

Sixty per cent of the members who responded to the organization’s online survey carried out between June 18 and July 9 feel the capital gains changes will have a “very negative” impact on investment.

Some 86 per cent feel the capital gains changes will hinder their ability to attract and retain talent, especially in a Canadian tech environment that 50 per cent characterized as “unhealthy.”

Benjamin Bergen, the group’s president, said he’s seen data showing the number of Canadians that moved south of the border in 2022 was 122,000— a figure that likely included tech workers seeking higher salaries and entrepreneurs looking to take advantage of the U.S.’s easier access to funding. (Some 67 per cent of survey respondents said their top challenge is accessing capital.)

“That’s really just an indication that it was bad before this capital gains piece came in and now it’s only going to make it worse,” he said.

That sentiment was echoed by several top tech names, including Shopify Inc. president Harley Finkelstein.

Hours after the budget’s release, he wrote on the social media site X, “What. Are. We. Doing?!?”

“This is not a wealth tax, it’s a tax on innovation and risk taking,” he later added. “Our policy failures are America’s gains.”

Tech workers are particularly affected by capital gains changes because they tend to be well paid and many own stock options or their own companies.

Research released by The Dais, a public policy organization based at Toronto Metropolitan University, in June showed the median Canadian tech worker had $84,000 in equity gross value that has not yet been sold. About 1,960 tech workers declared more than $250,000 in capital gains in 2021.

Based on those numbers, the report said 0.20 per cent of tech workers would be affected by the change, compared with 0.15 per cent of non-tech workers.

CCI has been trying to fight the tax since April, when it drafted an open letter to Prime Minister Justin Trudeau and Freeland urging them to rethink their decision. The letter has been signed by more than 2,000 tech workers including Lightspeed Commerce Inc. chief executive Dax Dasilva and 1Password founder Roustem Karimov.

Bergen is hopeful change could still happen.

“There is opportunity for us to try and make it less bad,” he said. “But how do you take something from being a punch in the gut to a slap maybe across the face?”

This report by The Canadian Press was first published July 18, 2024.

The Canadian Press. All rights reserved.

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RCMP investigating after three found dead in Lloydminster, Sask.

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LLOYDMINSTER, SASK. – RCMP are investigating the deaths of three people in Lloydminster, Sask.

They said in a news release Thursday that there is no risk to the public.

On Wednesday evening, they said there was a heavy police presence around 50th Street and 47th Avenue as officers investigated an “unfolding incident.”

Mounties have not said how the people died, their ages or their genders.

Multiple media reports from the scene show yellow police tape blocking off a home, as well as an adjacent road and alleyway.

The city of Lloydminster straddles the Alberta-Saskatchewan border.

Mounties said the three people were found on the Saskatchewan side of the city, but that the Alberta RCMP are investigating.

This report by The Canadian Press was first published on Sept. 12, 2024.

Note to readers: This is a corrected story; An earlier version said the three deceased were found on the Alberta side of Lloydminster.

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Three injured in Kingston, Ont., assault, police negotiating suspect’s surrender

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KINGSTON, Ont. – Police in Kingston, Ont., say three people have been sent to hospital with life-threatening injuries after a violent daytime assault.

Kingston police say officers have surrounded a suspect and were trying to negotiate his surrender as of 1 p.m.

Spokesperson Const. Anthony Colangeli says police received reports that the suspect may have been wielding an edged or blunt weapon, possibly both.

Colangeli says officers were called to the Integrated Care Hub around 10:40 a.m. after a report of a serious assault.

He says the three victims were all assaulted “in the vicinity,” of the drop-in health centre, not inside.

Police have closed Montreal Street between Railway Street and Hickson Avenue.

This report by The Canadian Press was first published Sept. 12, 2024.

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Government intervention in Air Canada talks a threat to competition: Transat CEO

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Demands for government intervention in Air Canada labour talks could negatively affect airline competition in Canada, the CEO of travel company Transat AT Inc. said.

“The extension of such an extraordinary intervention to Air Canada would be an undeniable competitive advantage to the detriment of other Canadian airlines,” Annick Guérard told analysts on an earnings conference call on Thursday.

“The time and urgency is now. It is time to restore healthy competition in Canada,” she added.

Air Canada has asked the federal government to be ready to intervene and request arbitration as early as this weekend to avoid disruptions.

Comments on the potential Air Canada pilot strike or lock out came as Transat reported third-quarter financial results.

Guérard recalled Transat’s labour negotiations with its flight attendants earlier this year, which the company said it handled without asking for government intervention.

The airline’s 2,100 flight attendants voted 99 per cent in favour of a strike mandate and twice rejected tentative deals before approving a new collective agreement in late February.

As the collective agreement for Air Transat pilots ends in June next year, Guérard anticipates similar pressure to increase overall wages as seen in Air Canada’s negotiations, but reckons it will come out “as a win, win, win deal.”

“The pilots are preparing on their side, we are preparing on our side and we’re confident that we’re going to come up with a reasonable deal,” she told analysts when asked about the upcoming negotiations.

The parent company of Air Transat reported it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31. The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.

Revenue totalled $736.2 million, down from $746.3 million in the same quarter last year.

On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.

It attributed reduced revenues to lower airline unit revenues, competition, industry-wide overcapacity and economic uncertainty.

Air Transat is also among the airlines facing challenges related to the recall of Pratt & Whitney turbofan jet engines for inspection and repair.

The recall has so far grounded six aircraft, Guérard said on the call.

“We have agreed to financial compensation for grounded aircraft during the 2023-2024 period,” she said. “Alongside this financial compensation, Pratt & Whitney will provide us with two additional spare engines, which we intend to monetize through a sell and lease back transaction.”

Looking ahead, the CEO said she expects consumer demand to remain somewhat uncertain amid high interest rates.

“We are currently seeing ongoing pricing pressure extending into the winter season,” she added. Air Transat is not planning on adding additional aircraft next year but anticipates stability.

“(2025) for us will be much more stable than 2024 in terms of fleet movements and operation, and this will definitely have a positive effect on cost and customer satisfaction as well,” the CEO told analysts.

“We are more and more moving away from all the disruption that we had to go through early in 2024,” she added.

This report by The Canadian Press was first published Sept. 12, 2024.

Companies in this story: (TSX:TRZ)

The Canadian Press. All rights reserved.



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