In the absence of an international agreement on taxing digital giants, Ottawa is officially imposing a 3% tax on the services they offer in Canada, more than three and a half years after announcing it.
The project of a special tax on online advertising or the sale of data, for example, has been in the Trudeau government’s plans since the fall 2020 economic statement.
Finance Minister Chrystia Freeland, however, wanted to give a chance to negotiations between member countries of the Organisation for Economic Co-operation and Development (OECD) and the G20 on this subject.
It pushed back the creation of this digital services tax (DST) to early 2024. However, its implementation had to wait for the passage of Bill C-59 on the economic statement last fall, which received royal assent at the end of June. An order stamped last Friday makes the DST official in Canada.
“Unfortunately, despite our best efforts, deadlines for reaching a multilateral agreement have repeatedly slipped. We are committed to protecting Canada’s national economic interest and the digital services tax was passed by Parliament last month,” wrote spokesperson Katherine Cuplinskas in an email to Duty THURSDAY.
Such a tax already applies to web giants in other countries, such as France, the United Kingdom and Italy. However, Canada’s plan had irritated 138 OECD countries in the midst of negotiations on this exact issue. The United States has repeatedly and very explicitly warned Canada against the idea.
Canada still says it wants to see an agreement on international tax reform. The reform is being carried out in two parts — or “pillars” — with the goals of making multinationals pay tax where they are located and taxing them at a minimum of 15%.
In the meantime, digital companies that generate revenues of more than 750 million euros worldwide, and 20 million dollars in Canada, will have to send 3% of their annual revenues to the federal government. Since this tax is retroactive to 2022, the companies concerned already owe money to the tax authorities.
Among the opposition in Ottawa, the digital services tax was called for by the Bloc Québécois and the New Democratic Party (NDP). Such a tax was also promised in the Conservative Party of Canada’s platform in 2021, which did not prevent Ontario MP and Conservative critic for international trade, Kyle Seeback, from railing against the measure on Thursday, calling it on social media “another Trudeau tax raid” that will hurt Canada in the long term.