Canada Has ‘Lost the Plot’: Investors, Entrepreneurs Not Happy with Budget

Canada’s largest fintech is not the only company pissed off at the federal government.

Alongside the displeased Shopify in Ottawa is a coast-to-coast collection of complainers, including investors and entrepreneurs throughout British Columbia.

What, exactly, are they up in arms for?

Canada’s federal government recently dropped its new budget and there’s something in particular about it that many entrepreneurs across the nation have expressed discontent with.

Specifically, the budget significantly raises the tax rate on capital gains for individuals who have more than $250,000 capital gains in a year, from half to two-thirds.

While this may sound to some like a relatively harmless tax raise on the ultra-wealthy, the budget change could have unintended consequences.

In particular, the tax rate deals a blow to entrepreneurs in Canada, experts point out.

Shopify CEO Tobi Lutke was unimpressed with the news, quoting a friend who responded to the budget by stating that Canada’s government is “determined to . . . leave no stone unturned in deterring [innovation].”

Harley Finkelstein, Shopify’s President, agreed, posting his opinions on the matter on X.

“We need to be doing everything we can to turn Canada into the best place for entrepreneurs to build,” Finkelstein wrote. “What’s proposed in the federal budget will do the complete opposite.”

Innovators and entrepreneurs will suffer and their success will be penalized, according to Finkelstein.

“This is not a wealth tax,” he said. “It’s a tax on innovation and risk taking.”

The Shopify veteran fears it may worsen Canada’s longstanding problem of “brain drain” to the U.S., where opportunities appear more ripe.

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

In B.C., many share the sentiment. Jack Newton, founder of Clio, was dismayed by the news.

“The Government of Canada needs to urgently reconsider the decisions it just shipped in its new budget,” Newton stated on X.

Newton has grown Vancouver’s Clio from a mere idea in 2008 to, in 2024, a global force in legal technology with over 150,000 customers in more than 100 countries.

But the successful serial entrepreneur believes the new change will exact a “hugely harmful impact to entrepreneurship in this country.”

Boris Wertz, a well-known B.C. entrepreneur-turned-investor, is equally displeased.

“The government of Canada has unfortunately completely lost their plot on innovation & entrepreneurship,” the Version One Ventures founder offered bluntly on X.

In his post, Wertz points out several flaws from Canada’s budget, beyond just the tax hike.

The VC says Canada is “trying to pick winners” through initiatives such as superclusters and that the AI regulation proposed is “very rigid.”

These factors, combined with a dramatic rise in public sector employees and a higher capital gains tax rate, suggest Canada is actively killing its own innovation marketplace, warns Wertz.

If this sounds like exaggeration, know that the Council of Canadian Innovators believes the tax hike alone could “do irreparable harm to the Canadian innovation economy.”

“The fact of the matter is that the best way to boost revenue for the government is to drive economic growth and productivity gains,” stated CCI president Benjamin Bergen, “and the best possible way to do that is by championing the success of Canada’s homegrown innovators.”