(Washington) A “big battle” between Canada and the United States could be looming over Justin Trudeau’s government’s plan to impose a tax on digital services.
US Ambassador David Cohen, who is Washington’s envoy to Ottawa, called the tax that would apply to large digital services companies “discriminatory”.
Mr. Cohen, whose nearly two years as U.S. ambassador were marked by friendly but frank and sometimes direct speeches on cross-border concerns, issued the warning after a dinner conference hosted by the Canadian Club of Ottawa, Tuesday.
“This will be a point of contention unless it is resolved,” said Mr. Cohen when the subject of the Canadian digital services tax came up during question period.
“There comes a point where either we’re going to have to come to an agreement or we’re going to have a big battle. »
The 3% Digital Services Tax (DST) targets foreign companies, many of them based in the United States, that earn revenue through subscriptions or other services in Canada. It should come into force in January, with retroactive effect until 2022.
This measure was presented as a step to support the collective effort of G20 countries and the Organization for Economic Cooperation and Development (OECD) to develop a global digital taxation framework.
However, this has not happened so far. However, Finance Minister Chrystia Freeland, who was in Washington for meetings earlier this month to discuss critical minerals with her American counterparts, hinted at progress on Tuesday.
“We had good conversations about TSN,” said M.me Freeland. I remain cautiously optimistic about our ability to reach an agreement with our American partners. »
Mr. Cohen stressed that the United States understands Canada’s position, but that the country is simply asking the Canadian government to allow more time for the OECD framework to be put in place.
“The United States believes that digital services taxes discriminate against American companies,” said Mr. Cohen. What the United States asked for […], it’s an extra year or two to try to put the OECD framework in place. »
Source of disagreement
The prospect of Ottawa imposing a digital tax on an industry heavily concentrated south of the border has continued to gain traction in Washington as a significant irritant in Canada-U.S. relations.
Last month, members of the US House of Representatives Ways and Means Committee, which oversees international trade issues, wrote to warn of “significant consequences” should Canada move forward. before with tax.
“Canada’s unusually aggressive and discriminatory approach would target American businesses and workers who would disproportionately bear the burden of this new tax,” they wrote.
The letter, addressed to US Treasury Secretary Janet Yellen and US Trade Representative Katherine Tai, was co-signed by 41 committee members, Democrats and Republicans.
The document also questioned whether this measure could constitute a violation of Canada’s obligations under the Canada–United States–Mexico Agreement or its commitments under the World Trade Organization treaties ( WTO).
The letter says the vast majority of OECD countries working on the issue have agreed to push back their own deadlines until the end of 2024.
Ahead of a bilateral meeting between Prime Minister Justin Trudeau and President Joe Biden in Ottawa earlier this year, industry lobbyists urged the U.S. president to take a hard line on the issue with his Canadian counterpart .
Canada’s position, they warned, would set a “harmful precedent” for other countries participating in OECD efforts, which may be inclined to follow Canada’s example and impose taxes on U.S. digital services .
The two leaders will have the opportunity to discuss the issue in person on Friday, when Mr. Trudeau is in the US capital to participate in a mini-summit on trade and irregular immigration organized by the White House, said Mr. .Cohen.