Cross-border economy experts are warning that Canada’s decision to strike out alone on a digital services tax could put it offside with its allies — and risk retaliation from the United States.
“There are a number of Canada’s allies that are anxious because Canada is breaking ranks when it’s usually a consensus follower” and has been engaged in the development of a multilateral approach to the issue, said Christopher Sands, director of the Canada Institute at the Woodrow Wilson International Center for Scholars in Washington, D.C.
The Liberal government first pledged in 2020 to bring in a digital services tax (DST) on big tech companies, but so far no levy is in place. The tax would apply to revenues of large tech companies that provide digital services, such as e-commerce, social media and online advertising.
The delay is due in part to the existence of a large-scale international process — led by the the Organization for Economic Co-operation and Development (OECD) and the G20 — that would implement a taxation system on major multinationals and would potentially replace digital services taxes that are currently in place around the world.
Along with the rest of the OECD, the government agreed to a two-year deferral period in 2021 to implement that tax, but Canada has now said it will not go along with an additional year’s delay.
The House9:05Why a new tax on big tech companies could spur the next Canada-U.S. spat
Featured VideoMove over, softwood lumber — there’s a new trade war on the horizon. CBC’s Emma Godmere looks at Canada’s move to press ahead with its long-planned Digital Services Tax on global tech giants and why it has U.S. lawmakers fuming. Tax law professor Allison Christians, former Canadian consul general James Villeneuve, cross-border trade watcher Laura Dawson and the Wilson Center’s Christopher Sands weigh in.
In a revised estimate released last week, the Parliamentary Budget Office calculated that Canada’s proposed DST could increase federal government revenues by $7.2 billion over five years.
Deputy Prime Minister and Finance Minister Finance Chrystia Freeland, shown in Ottawa last month, says delaying implementation of an international agreement by another year puts Canada at a disadvantage relative to countries that already have digital services taxes. (Patrick Doyle/The Canadian Press)
James Villeneuve, a senior business adviser in the Toronto law office of Fasken who previously served as Canada’s consul general in Los Angeles, said there are a few reasons why Canada is committed to the tax.
“Revenue to the government is one big benefit,” he said. “The second benefit could be a communication policy that says we as a country are prepared to dig in against giant tech companies that aren’t based in the country.”
As part of a series of interviews with cross-border economics experts on CBC’s The House, which aired Saturday, Sands said Canada faces pressure on both the domestic and international fronts, making for a complex situation.
“It’s funny, everyone’s up in arms about U.S. divisions in Congress and how Congress can never agree on anything. Well, you know, one of the things they agree on is that this proposed tax in Canada is bad for American business,” said Laura Dawson, executive director of the U.S.-Canada group Future Borders Coalition.
Dawson, a Canadian based in Georgia, says Canada should think twice about its course of action on the potential tax, or risk widening a possible trade war with the U.S.
“When the U.S. Chamber of Commerce comes out and says, ‘Hey, don’t do this,’ maybe you raise an eyebrow. But when the Canadian Chamber of Commerce and the Business Council of Canada both say, ‘Hey, this is not good for Canada,’ it suggests to me that this offside independent approach is really not in the national interest,” she said.
Canada risks blowback from U.S., experts say
Sands and Dawson both said that Canada’s stance could make it into a target during next year’s U.S. presidential election.
“I suspect that Donald Trump or other Republicans will feel free to bash away at Canada,” Sands said, referring to the former U.S. president who’s running again.
Ottawa also risks escalating a conflict with big tech companies, who experts say could try to single Canada out.
“The idea had been that we would all move together because together it would be harder for the companies to sort of play us off of one another,” Sands said.
Senate approves bill to make streamers pay for Cancon
Featured VideoThe Senate has passed Bill C-11, which will force streaming platforms like Netflix and YouTube to contribute to funding Canadian content. Critics say the bill is too ambiguous, leaving many issues unresolved.
“The companies have an incentive to make an example out of Canada, trying to make this as painful for Canada as possible to try to drive them back into a consensus,” he said.
Dawson said Canada’s best move right now is to fall back in line with the international, multilateral approach, rather than striking out on its own.
“No one is arguing in favour of leaving big tech companies untaxed. I think there’s general agreement worldwide that there needs to be some form of fair taxation,” she said.
“But first of all, it needs to be multilateral because digital service is not one-way trade, not one country to another country. It’s multilateral, it’s moving everywhere.”
WINNIPEG – The federal New Democrats have kept a longtime stronghold in the Elmwood-Transcona riding in Winnipeg.
The NDP’s Leila Dance won a close battle over Conservative candidate Colin Reynolds, and says the community has spoken in favour of priorities such as health care and the cost of living.
Elmwood-Transcona has elected a New Democrat in every election except one since the riding was formed in 1988.
The seat became open after three-term member of Parliament Daniel Blaikie resigned in March to take a job with the Manitoba government.
A political analyst the NDP is likely relieved to have kept the seat in what has been one of their strongest urban areas.
Christopher Adams, an adjunct professor of political studies at the University of Manitoba, says NDP Leader Jagmeet Singh worked hard to keep the seat in a tight race.
“He made a number of visits to Winnipeg, so if they had lost this riding it would have been disastrous for the NDP,” Adams said.
The strong Conservative showing should put wind in that party’s sails, Adams added, as their percentage of the popular vote in Elmwood-Transcona jumped sharply from the 2021 election.
“Even though the Conservatives lost this (byelection), they should walk away from it feeling pretty good.”
Dance told reporters Monday night she wants to focus on issues such as the cost of living while working in Ottawa.
“We used to be able to buy a cart of groceries for a hundred dollars and now it’s two small bags. That is something that will affect everyone in this riding,” Dance said.
Liberal candidate Ian MacIntyre placed a distant third,
This report by The Canadian Press was first published Sept. 16, 2024
OTTAWA – Prime Minister Justin Trudeau say the Liberals have “all sorts of reflections” to make after losing a second stronghold in a byelection in Montreal Monday night.
His comments come as the Liberal cabinet gathers for its first regularly scheduled meeting of the fall sitting of Parliament, which began Monday.
Trudeau’s Liberals were hopeful they could retain the Montreal riding of LaSalle—Émard—Verdun, but those hopes were dashed after the Bloc Québécois won it in an extremely tight three-way race with the NDP.
Louis-Philippe Sauvé, an administrator at the Institute for Research in Contemporary Economics, beat Liberal candidate Laura Palestini by less than 250 votes. The NDP finished about 600 votes back of the winner.
It is the second time in three months that Trudeau’s party lost a stronghold in a byelection. In June, the Conservatives defeated the Liberals narrowly in Toronto-St. Paul’s.
The Liberals won every seat in Toronto and almost every seat on the Island of Montreal in the last election, and losing a seat in both places has laid bare just how low the party has fallen in the polls.
“Obviously, it would have been nicer to be able to win and hold (the Montreal riding), but there’s more work to do and we’re going to stay focused on doing it,” Trudeau told reporters ahead of this morning’s cabinet meeting.
When asked what went wrong for his party, Trudeau responded “I think there’s all sorts of reflections to take on that.”
In French, he would not say if this result puts his leadership in question, instead saying his team has lots of work to do.
Bloc leader Yves-François Blanchet will hold a press conference this morning, but has already said the results are significant for his party.
“The victory is historic and all of Quebec will speak with a stronger voice in Ottawa,” Blanchet wrote on X, shortly after the winner was declared.
NDP Leader Jagmeet Singh and his party had hoped to ride to a win in Montreal on the popularity of their candidate, city councillor Craig Sauvé, and use it to further their goal of replacing the Liberals as the chief alternative to the Conservatives.
The NDP did hold on to a seat in Winnipeg in a tight race with the Conservatives, but the results in Elmwood-Transcona Monday were far tighter than in the last several elections. NDP candidate Leila Dance defeated Conservative Colin Reynolds by about 1,200 votes.
Singh called it a “big victory.”
“Our movement is growing — and we’re going to keep working for Canadians and building that movement to stop Conservative cuts before they start,” he said on social media.
“Big corporations have had their governments. It’s the people’s time.”
New Democrats recently pulled out of their political pact with the government in a bid to distance themselves from the Liberals, making the prospects of a snap election far more likely.
Trudeau attempted to calm his caucus at their fall retreat in Nanaimo, B.C, last week, and brought former Bank of Canada governor Mark Carney on as an economic adviser in a bid to shore up some credibility with voters.
The latest byelection loss will put more pressure on him as leader, with many polls suggesting voter anger is more directed at Trudeau himself than at Liberal policies.
This report by The Canadian Press was first published Sept. 17, 2024.
The New Democrats have declared a federal byelection victory in their Winnipeg stronghold riding of Elmwood—Transcona.
The NDP candidate Leila Dance told supporters in a tearful speech that even though the final results weren’t in, she expected she would see them in Ottawa.
With several polls still to be counted, Conservative candidate Colin Reynolds conceded defeat and told his volunteers that they should be proud of what the Conservatives accomplished in the campaign.
Political watchers had a keen eye on the results to see if the Tories could sway traditionally NDP voters on issues related to labour and affordability.
Meanwhile in the byelection race in the Montreal riding of LaSalle—Émard—Verdun the NDP, Liberals and Bloc Québécois remained locked in an extremely tight three-way race as the results trickled in slowly.
The Liberal stronghold riding had a record 91 names on the ballot, and the results aren’t expected until the early hours of the morning.
This report by The Canadian Press was first published Sept. 16, 2024.
