Spotify Co-Founder Calls for Reforms to Shield Sweden’s Startups

One of Spotify Ltd.’s co-founders has again pressed the music streaming service’s campaign for education, tax and housing reform in Sweden to preserve the country’s vibrant environment for startups.

Martin Lorentzon, who started Spotify with Daniel Ek, joined venture capitalist and Skype founder Niklas Zennstrom, former Finance Minister for Sweden Anders Borg and several other business leaders in signing an open letter Thursday calling for reforms, and warned that failure to do so could force businesses from the Nordic region’s biggest economy.

Martin Lorentzon

Source: Cal Sport Media via AP Images

“The issue of attracting workforce and distributing the ownership is a general issue -- it affects both new and established businesses in the country,” Lorentzon and the other signatories wrote.

In recent months, Spotify’s founders and managers have made several public calls to Swedish lawmakers to amend tax legislation. They’re seeking a reduction on the rate employees face on stock options, which are used to attract employees by offering them a share of a startup’s increasing value over time. In an open letter published on April 11, Spotify said that the current tax rules make awarding employees options “impossible.”

In Sweden, stock options are taxed as income from employment, at a rate as high as 67 percent. The government should look to the U.S., where the capital gains tax is only 15 to 20 percent, or to Germany, where the levy on such options is 25 percent, leaders of the startup community have said. While a review ordered by the government has proposed changes to the current system, it only covers companies with fewer than 50 employees, not larger firms such as Spotify.

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