Ottawa finally imposes its tax on digital services

Photo: Sean Kilpatrick The Canadian Press Such a tax already falls on web giants in other countries, such as France, the United Kingdom and Italy.

In the absence of an international agreement on taxes on 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.

Canada's Finance Minister, Chrystia Freeland, clarified Thursday that she believes she can avoid retaliation from the United States. She discussed negotiations with US Treasury Secretary Janet Yellen for a “win-win” resolution of this new front in trade tensions between the two countries.

< p>“It was not reasonable, not fair, to keep our [tax] measure on hold indefinitely,” she explained to journalists during a press briefing in Milton, Ontario.

The project of a special tax on online advertising or the sale of data, for example, has been on the cards of the Trudeau government since the fall 2020 economic statement. Canada, however, wanted to give the countries' negotiations a chance members of the Organization for Economic Cooperation and Development (OECD) and the G20 on this subject.

The creation of this tax on digital services (TSN) has thus was postponed, initially for the beginning of 2024. Its implementation, however, 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 . A decree issued last Friday finally formalized the entry into force of TSN in Canada.

“Despite all efforts, there have been repeated deadlines to reach a multilateral agreement. We are committed to protecting Canada's national economic interest and the digital services tax was passed by Parliament last month,” explains the spokesperson for the Minister of Finance, Katherine Cuplinskas, in an email to Devoir.

Such a tax already falls on Web giants in other countries, such as in France, in United Kingdom and Italy, argues Minister Freeland. Canada's plan to create its own, however, had irritated 138 OECD countries in the middle of negotiations on this exact issue. The United States has repeatedly and very explicitly warned Canada against such a measure.

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Canada still says it wants to see an agreement on international tax reform. This reform is carried out in two parts — or “pillars” — with the objectives 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 in Canada, will have to send 3% of their annual revenue to the federal government. Since this tax is retroactive to 2022, the companies concerned already owe sums to the tax authorities.

Among the oppositions in Ottawa, the tax on digital services was demanded by the Bloc Québécois and the New Democratic Party (NDP).

Such a tax was also promised in the platform of the Conservative Party of Canada 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 run.