This week, Canada's Parliamentary Budget Officer (PBO) released the Digital Services Tax report, which analyzes the taxation implications of (Prime Minister Justin) Trudeau’s government efforts to tax specific online companies.
The tax would target companies that offer services such as online marketplaces, advertising, media, and user data services. As currently proposed, companies with revenues exceeding $20 million would be subject to a "digital services tax" equivalent to 3% of their revenues.
According to the PBO, implementing this digital services tax will generate $7.2 billion in tax revenue over the next five years. That has raised concerns among industry experts and stakeholders. The main problem is that these costs will ultimately be passed on to Canadian users of these services.
For instance, many may remember the promise made by the government that it would not tax Netflix. However, (the government) decided to reverse that promise, the tax now appears on your monthly bill, and you are responsible for paying it.
This digital service tax has the potential to generate an additional $7.2 billion from Canadians over the next five years. However, this comes when many Canadians are struggling to afford groceries, rent and mortgage payments.
As these digital companies are predominantly American, discussions have arisen among elected officials in (the U.S.) Congress who are increasingly advocating for retaliatory trade sanctions against Canada in response to the proposed digital services tax.
The Biden administration had aimed to establish a unified approach for a minimum tax level to prevent multinational companies from exploiting tax rules through aggressive tax planning strategies.
However, the government has chosen to break from the Biden plan and proceed independently by implementing this digital services tax as early as Jan. 1, 2024.
Another concern is some online companies may choose not to offer their services in Canada, similar to Meta's (formerly Facebook) decision to no longer allow the sharing of Canadian news content on its social media platform in response to Bill C-18.
Many small independent news organizations have pointed out that this situation has adversely affected them.
During the devastating August wildfires, it was frustrating for many to be unable to share crucial online news information with their family, friends and neighbours.
This frustration was amplified because much of the most relevant local media content came from small local media organizations.
The government defends the digital services tax to ensure large online companies pay their "fair share."
That leads to my question for this week:
Will Canadians likely be the ones who pay the Liberal (government's) digital services tax? Do you support it? Why or why not?
I can be reached at [email protected] or by calling toll-free at 1-800-665-8711.
Dan Albas is the Conservative MP for Central Okanagan-Similkameen-Nicola.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.