OTTAWA _ Federal New Democrats are trying to pin down whether the Trudeau government plans to fulfil or abandon its pledge to close a controversial tax loophole, which critics say primarily benefits CEOs and other senior executives.
The Liberals made the promise to clamp down on what are known as stock-option deductions during the last election, but have remained ambiguous about their intentions since taking power more than two years ago.
It was in that context that the NDP, which had also promised to act against the deductions, tabled a motion Thursday calling on the government to make good on its promise in the coming federal budget. It will be put to a vote next week.
The Liberals supported a similar motion last March, but it did not contain a specific timeline for implementing the motion, which also urged the government to clamp down on tax havens.
The stock-option deduction works by taxing only 50 per cent of the earnings that an employee receives when they cash in any stock options received as part of their compensation packages, if certain conditions are met.
Supporters say the deduction, which Finance Canada estimates cost the federal treasury about $840 million last year, is important for attracting talent and encouraging start-ups, particularly in technology sectors.
But critics, including the NDP, say most stock options in Canada are given to senior executives who are already receiving adequate compensation far above what the average Canadian is earning.
“When we talk about the stock-option deduction loophole, we’re not talking about something that is spread out among Canadians generally,” NDP finance critic Peter Julian said while introducing the motion.
“We can take those funds, make sure that those very wealthy people pay their fair share of income tax, and ensure that we’re taking care of regular Canadians.”
With Finance Minister Bill Morneau at a pre-G7 symposium, it fell to his parliamentary secretary, Joel Lightbound, and International Trade Minister Francois-Philippe Champagne to spearhead the government’s response.
Both sidestepped questions about the deductions and instead pointed to various initiatives launched by the Liberals, including raising taxes on top earners, increasing child benefits and cracking down on tax havens.
“This is the government that has put tax fairness at the centre of our actions,” Champagne said. “We have invested more than $800 million in the Canada Revenue Agency because we believe in tax fairness and combating tax evasion.”
Yet with a vote expected next Tuesday, the NDP is clearly hoping to push the Liberals off the dance floor and force them to commit to either fulfilling the promise _ or breaking it.
In response to the NDP motion, the Canadian Council of Innovators, which represents dozens of technology companies across the country, released a statement defending the stock-option deductions as essential for their businesses.
“Changes to the way stock options are taxed would have disastrous impacts on the ability of Canadian firms to scale into global technology giants,” said Benjamin Bergen, the council’s CEO.
“We strongly urge the NDP to meet with our members to better understand the access to talent challenges CEOs are facing, and to not advocate for a cap on employee stock options, which would hinder the industry.”