Despite OECD talks on common approach, Canada becomes latest country to announce its own digital services tax on big tech
Tech name tech firms face more pressure of their tax arrangements in the years ahead, with Canada becoming the latest country to announce its tax intentions going forward.
The Finance Department of America’s northern neighbour announced that Canada will impose a tax on corporations providing digital services from 2022, Reuters reported.
The Canadian digital services tax will remain in place until other nations come up with a coordinated approach on taxation.
Last week the French Finance Ministry warned big name tech firms such as Amazon, Google, Facebook and Apple, that they would have to begin paying the digital services tax in France from December.
That came after French Finance Minister Bruno Le Maire in October urged the European Union to press ahead with plans for a bloc-wide digital tax.
Tech companies have long been criticised by lawmakers for their tax practices that sees them reducing their tax bills by booking profits in low-tax countries (such as Ireland) regardless of the location of the end customer.
Plans for an EU-wide digital tax have previously failed upon the objections of certain countries, forcing member states, most notably France, to push ahead with their own national levies earlier this year.
That sparked outrage from US President Trump and US officials investigated the French digital tax policy and threatened taxes of French wine and cheese.
However, that dispute with the US was postponed when France offered to suspend its digital tax on tech companies’ income in France until the end of the year while the OECD (organisation for Economic Cooperation and Development) negotiated new rules for the cross-border taxation of big digital companies.
But President Trump pulled the US out of OECD digital tax negotiations in June, citing a lack of progress.
The 140 nations involved in the OECD talks agreed in October to keep negotiating until mid 2021.
According to Reuters, Canada said it was concerned about a delay in reaching agreement.
The new tax would come into effect on 1 January 2022, and remain in place until a common approach is agreed upon.
The measure would reportedly raise federal revenues by C$3.4 billion ($2.6 billion) over five years, starting in the 2021-22 fiscal year.
“Canadians want a tax system that is fair, where everyone pays their fair share,” Finance Minister Chrystia Freeland reportedly told legislators in the Autumn economic update.
“Canada will act unilaterally, if necessary, to apply a tax on large multinational digital corporations, so they pay their fair share just like any other company operating in Canada.”
Foreign-based vendors with no physical presence in Canada will also reportedly have to start collecting sales taxes on products such as mobile apps, online video gaming and streaming. That measure should raise C$1.2 billion over five years.