(Ottawa) Justin Trudeau’s government avoided including in the implementation document of its economic statement the deadline of January 2024 to begin to impose the digital giants, in a desire not to offend the Americans, indicates a government source.
This deadline at the beginning of next year has however been mentioned publicly for months by the Minister of Finance, Chrystia Freeland.
The one who is also deputy prime minister tabled the ways and means motion on Tuesday which includes proposed legislative changes to implement key measures from the economic statement presented last week.
Once this motion is adopted, the Liberals will be able to table a bill containing the same elements, including provisions concerning a possible Digital Services Tax Act.
This latest piece of legislation has been promised by the Liberals for years. It is presented as a way of forcing digital companies established abroad that benefit from revenues in Canada to do their part by subjecting them to a 3% tax.
Asked about the fact that the January 2024 deadline is not found in the document of more than 500 pages that she presented on Tuesday, Ms.me Freeland affirmed in a press briefing that “the position [du] government is unchanged.
Negotiations are underway, on the international scene, with the Organization for Economic Cooperation and Development (OECD) as well as the G20 countries on the establishment of a multinational framework called, in the jargon, “pillar one” .
Ottawa could, however, decide to move forward on its own, as Mr.me Freeland has already suggested this.
“The position of our government has always been […] that we have a preference for a multilateral agreement,” the minister said on Tuesday. She added, in the same breath, that if things do not move as planned by the end of the year, “Canada will have no choice but to introduce its own digital services tax.”
“Additional flexibility” vis-à-vis the United States
A government source familiar with this matter affirmed that we should not see “a step backwards” in the absence of a deadline written in black and white in the ways and means motion, assuring that the “desire to move forward forward quickly” remains.
This source spoke on condition of anonymity in order to speak more freely. She indicated that there is no mention of a date in order to add “additional flexibility” in Canada’s discussions with the United States, or even to avoid certain repercussions that could be imposed by the administration of Joe Biden.
For his part, Mme Freeland said “nothing is stopping” Ottawa from moving forward unilaterally, without prior approval from the U.S. Congress.
“It’s really a question of fairness,” she said. She pointed out that several governments elsewhere in the world already collect a digital services tax in their own jurisdiction.
“This tax […] helps make essential investments in their countries and it is simply not fair for Canadians to be deprived of this income,” continued the minister.
Her MP colleague Sophie Chatel, who worked with the OECD, added in an interview by affirming that “each year” which passes without taxation is equivalent to “income which is lost”.
She noted that the OECD has pushed back the timetable for the entry into force of “pillar one” on several occasions.
“Meanwhile, countries like the United Kingdom, France, Italy, Spain, Austria, Turkey are taking revenue from the digital economy, but not Canada,” summarized the former tax specialist.
The Americans were “reasonable”
The Liberal elected official for the Pontiac constituency explained that the intention is to move forward in the “interim” period with a Canadian law, that is to say while waiting for the arrival of a “convention multilateral” of the OECD aimed at responding to the realities of more than a hundred countries.
“It is really clear that the desire is to arrive with a multilateral agreement in which key players like the United States are an integral part of the solution to restore the integrity of our international tax system. This is ideal. »
As for the concerns of some that the Joe Biden administration could sanction Canada because of its possible Digital Services Act,Mme Chatel tempers by adding nuances.
Faced with other countries that moved forward, she argued that the United States judged the measure to be “sanctionable”, but decided to put any sanctions on ice “until we put implement pillars 1 and 2 of the international tax reform”.
“So I think it was still a reasonable approach from the United States, and I hope that the Canadians will not have different treatment [des] other countries,” concluded Mr.me Chatel.
During a technical briefing for media, Government of Canada officials noted that it is not new that no dates appear in elements of the Canadian legislative proposal. It was argued that it will be up to the Council of Ministers, by means of the adoption of a decree, to set the date of entry into force of the possible law.
Tax credits, GST exemption
The motion presented Tuesday by Mme Freeland had to be passed before the bill including the provisions included therein could be tabled by the Liberals. The range of promised measures will only be able to materialize once royal assent has been obtained.
In addition to the provisions for taxing digital services, there are other measures promised in the economic statement, such as sick leave in the event of miscarriage and a withdrawal of the GST on psychotherapy care.
There are also proposed modifications to the Competition law. In the past, the Liberals have put forward such modernization as a way to stabilize the effect of the rising cost of living on consumers, particularly at the grocery store.
“We know that more competition translates into more options for consumers, which obviously promotes better prices,” said the Minister of Industry, François-Philippe Champagne, on Tuesday.
The bill implementing the economic statement, which the federal government hopes to formally present to the House of Commons on Wednesday, will also include measures for the establishment of tax credits for investments in clean technologies. These incentives were announced a long time ago by Ottawa.
Once they become a reality, these tax credits must be retroactive to March 28, 2023. A credit for carbon capture and storage must be made available, retroactive to January 2022.