[Canada] Tech giants to be taxed in 2024 despite pressure from US

This year Canada will begin to apply a proposed tax on the world’s biggest tech companies, despite threats of trade reprisals from US lawmakers, CPA Practice Advisor reports.

Legislation to enact the digital services tax is before Canada’s Parliament now. In budget documents published on April 16, the Finance Department said that once passed, “the tax would begin to apply for calendar year 2024, with that first year covering taxable revenues earned since Jan. 1, 2022.” 

The tax would reportedly be a 3 per cent levy on the digital services revenue a company makes from Canadian users above C$20 million ($14.5 million) in a calendar year. It would solely apply to companies with annual worldwide revenue of more than C$1.1 billion. Alphabet Inc. and Meta Platforms Inc. will number among those impacted.

In the budget, the government states that at least seven other countries, including the UK, France, Italy and Spain, already have similar taxes in place.

Canada’s parliamentary budget officer estimates that the tax will raise around C$7.2 billion over five fiscal years.

Canadian Finance Minister Chrystia Freeland previously said that the tax would not be enacted if a global tax treaty through the Organization for Economic Co-operation and Development is implemented. So far the US has not ratified that treaty.

“In view of consecutive delays internationally in implementing the multilateral treaty, Canada cannot continue to wait before taking action,” Ms Freeland’s department said in the budget.

US lawmakers and government officials reportedly view the tax as unfair to American firms and have threatened retaliation if Canada moves forward with it.

In a speech in October 2023, David Cohen - the U.S. ambassador to Canada - said, “That will be an area of contention unless it is resolved.

“We’re either going to have agreement or we’re going to have a big fight.”

The same month, US Senate finance committee leaders urged the Biden administration to make it clear to Canada that if the digital tax was enacted a US response would be immediate. In addition, business groups on both sides of the border have reportedly asked Ms Freeland to withdraw plans for the tax.

Source: CPA Practice Advisor

(Quotes via original reporting)

This year Canada will begin to apply a proposed tax on the world’s biggest tech companies, despite threats of trade reprisals from US lawmakers, CPA Practice Advisor reports.

Legislation to enact the digital services tax is before Canada’s Parliament now. In budget documents published on April 16, the Finance Department said that once passed, “the tax would begin to apply for calendar year 2024, with that first year covering taxable revenues earned since Jan. 1, 2022.” 

The tax would reportedly be a 3 per cent levy on the digital services revenue a company makes from Canadian users above C$20 million ($14.5 million) in a calendar year. It would solely apply to companies with annual worldwide revenue of more than C$1.1 billion. Alphabet Inc. and Meta Platforms Inc. will number among those impacted.

In the budget, the government states that at least seven other countries, including the UK, France, Italy and Spain, already have similar taxes in place.

Canada’s parliamentary budget officer estimates that the tax will raise around C$7.2 billion over five fiscal years.

Canadian Finance Minister Chrystia Freeland previously said that the tax would not be enacted if a global tax treaty through the Organization for Economic Co-operation and Development is implemented. So far the US has not ratified that treaty.

“In view of consecutive delays internationally in implementing the multilateral treaty, Canada cannot continue to wait before taking action,” Ms Freeland’s department said in the budget.

US lawmakers and government officials reportedly view the tax as unfair to American firms and have threatened retaliation if Canada moves forward with it.

In a speech in October 2023, David Cohen - the U.S. ambassador to Canada - said, “That will be an area of contention unless it is resolved.

“We’re either going to have agreement or we’re going to have a big fight.”

The same month, US Senate finance committee leaders urged the Biden administration to make it clear to Canada that if the digital tax was enacted a US response would be immediate. In addition, business groups on both sides of the border have reportedly asked Ms Freeland to withdraw plans for the tax.

Source: CPA Practice Advisor

(Quotes via original reporting)