San Francisco is reportedly planning to charge a corporate tax that will capture the surge in the valuations of employee stock options, especially when cashed after an IPO.

According to a San Francisco Chronicle report, the city’s District 4 Supervisor Gordon Mar is planning to propose a 1.12 percent surcharge on stock-based compensation.

The companies would be subject to the tax when their employees cash out their stock options, which means companies like Lyft and Pinterest that have gone public recently could be impacted by the measure.

“This is an important moment for us as a city to really reflect on what has played out in the last decade with the tech boom,” Mar told the daily.

“And how that has played such a direct and indirect role in so many of the challenges that we are having to grapple with in the city, whether that’s affordability or traffic congestion,” he added.

The move may restore the payroll tax rate that existed before 2011 when the Californian city changed its business tax laws to support pre-IPO tech startups so they do not move to other parts of San Francisco Bay Area.

The decision played out well for the city as many companies including Square, Twitter and Zendesk decided to monitor operation from San Francisco.

However, with a sudden surge in tech startups going public emerging in San Francisco, Mar opined that these companies should pay more to help offset “negative impacts” of their growth, like traffic congestion and housing affordability.

Reports suggest that the proposed tax could be rolled out as early as May, although support of least six members of the Board of Supervisors is needed for it to be applicable.

If San Francisco implements the tax, about $100-$200 million could be collected in just the first two years, the report added.

 

 

 

Source: Moneycontrol

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