November 20, 2015 / 8:00 PM / 3 years ago

Canada stock option tax hike would not be retroactive: finance minister

OTTAWA (Reuters) - If Canada’s new government raises taxes on stock options it will not apply to those already issued, Finance Minister Bill Morneau said on Friday, urging people not to rush into any action in the belief it will avoid taxes.

Canada's Finance Minister Bill Morneau listens to a question during a news conference upon the release of the economic and fiscal update in Ottawa, Canada November 20, 2015. REUTERS/Chris Wattie -

He said the Liberal government, which took power on Nov. 4, had not come to a conclusion on how to change the tax treatment of stock options and would likely be reviewing that in the next few months.

“I would like those Canadians who are concerned about this issue to understand is that any decisions we take on stock options will affect stock options issued from that date forward,” he told reporters.

“I hope (this) should relieve those Canadians who have that concern from taking actions that would be inappropriate.”

The Liberal platform pledged to cap how much could be claimed through the stock-option deduction, but said it would not touch employees with up to C$100,000 ($75,000) in annual stock-option gains.

Currently, Canadians are only taxable on 50 percent of the gain from exercising a stock option.

The Liberal platform said Finance Department figures showed 8,000 very high-income Canadians deduct an average of C$400,000 from their taxable incomes via stock options.

It said this represented three-quarters of the fiscal impact of this deduction, which in total cost C$750 million in 2014.

In promising to protect those employees with up to C$100,000 in gains, it said: “Stock options are a useful compensation tool for start-up companies.”

Reporting by Randall Palmer; Editing by Tom Brown

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