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.”
OTTAWA – Prime Minister Justin Trudeau says the NDP is caving to political pressure from Conservative Leader Pierre Poilievre when it comes to their stance on the consumer carbon price.
Trudeau says he believes Jagmeet Singh and the NDP care about the environment, but it’s “increasingly obvious” that they have “no idea” what to do about climate change.
On Thursday, Singh said the NDP is working on a plan that wouldn’t put the burden of fighting climate change on the backs of workers, but wouldn’t say if that plan would include a consumer carbon price.
Singh’s noncommittal position comes as the NDP tries to frame itself as a credible alternative to the Conservatives in the next federal election.
Poilievre responded to that by releasing a video, pointing out that the NDP has voted time and again in favour of the Liberals’ carbon price.
British Columbia Premier David Eby also changed his tune on Thursday, promising that a re-elected NDP government would scrap the long-standing carbon tax and shift the burden to “big polluters,” if the federal government dropped its requirements.
This report by The Canadian Press was first published Sept. 13, 2024.
Simon Jolin-Barrette, minister responsible for consumer protection, has tabled a bill to force merchants to calculate tips based on the price before tax.
That means on a restaurant bill of $100, suggested tips would be calculated based on $100, not on $114.98 after provincial and federal sales taxes are added.
The bill would also increase the rebate offered to consumers when the price of an item at the cash register is higher than the shelf price, to $15 from $10.
And it would force grocery stores offering a discounted price for several items to clearly list the unit price as well.
Businesses would also have to indicate whether taxes will be added to the price of food products.
This report by The Canadian Press was first published Sept. 12, 2024.
Quebec legislature member Youri Chassin has announced he’s leaving the Coalition Avenir Québec government to sit as an Independent.
He announced the decision shortly after writing an open letter criticizing Premier François Legault’s government for abandoning its principles of smaller government.
In the letter published in Le Journal de Montréal and Le Journal de Québec, Chassin accused the party of falling back on what he called the old formula of throwing money at problems instead of looking to do things differently.
Chassin says public services are more fragile than ever, despite rising spending that pushed the province to a record $11-billion deficit projected in the last budget.
He is the second CAQ member to leave the party in a little more than one week, after economy and energy minister Pierre Fitzgibbon announced Sept. 4 he would leave because he lost motivation to do his job.
Chassin says he has no intention of joining another party and will instead sit as an Independent until the end of his term.
He has represented the Saint-Jérôme riding since the CAQ rose to power in 2018, but has not served in cabinet.
This report by The Canadian Press was first published Sept. 12, 2024.
