Interesting read. I actually submitted feedback on the current policy around a month ago that reads very similarly to this article. My end suggestion being a flat ~20% capital gains tax like the UK, only on realised cash gains (when shares are liquidated). The result would be a system that I believe is fairer, but also yields a far higher tax return. Investors and founders own a much larger piece of the pie than employees in most startups. 20% of $1b is a lot more than 39% of $150M.
In the mean time, the low strike price and long exercise window are the best option for employers and I personally would not accept any ESOP remuneration offer without both of those. I still dislike this as it encourages employees to take unnecessary risks by exercising earlier (risks that they may not be fully informed on) in order to reduce future tax. And for ESOP schemes where there is not a long exercise window, employees essentially forfeit earned wages if they cannot afford to pay the tax bill.
Love it, I also support CGT in NZ as a way to level the field between employee tax and investors. That said having paid provisional tax for years on unrealised liquid employee shares I support taxing when you sell rather than when you vest. The FIF model is ok for offshore shares as a form of wealth tax but it does require you to pay for assets before you realise their value and in my experience leads to needing to sell stock before you would like to in order to pay the tax. Maybe a fair model is a bit of both pay a small percentage on your holding in tax each year and then pay more on the gains when you actually realise the value.
Interesting read. I actually submitted feedback on the current policy around a month ago that reads very similarly to this article. My end suggestion being a flat ~20% capital gains tax like the UK, only on realised cash gains (when shares are liquidated). The result would be a system that I believe is fairer, but also yields a far higher tax return. Investors and founders own a much larger piece of the pie than employees in most startups. 20% of $1b is a lot more than 39% of $150M.
In the mean time, the low strike price and long exercise window are the best option for employers and I personally would not accept any ESOP remuneration offer without both of those. I still dislike this as it encourages employees to take unnecessary risks by exercising earlier (risks that they may not be fully informed on) in order to reduce future tax. And for ESOP schemes where there is not a long exercise window, employees essentially forfeit earned wages if they cannot afford to pay the tax bill.
Love it, I also support CGT in NZ as a way to level the field between employee tax and investors. That said having paid provisional tax for years on unrealised liquid employee shares I support taxing when you sell rather than when you vest. The FIF model is ok for offshore shares as a form of wealth tax but it does require you to pay for assets before you realise their value and in my experience leads to needing to sell stock before you would like to in order to pay the tax. Maybe a fair model is a bit of both pay a small percentage on your holding in tax each year and then pay more on the gains when you actually realise the value.