The United States will challenge Canada’s brand new digital services tax (DST), which imposes royalties of 3% per year on web giants – mainly American – in court.
After being repeatedly postponed for years while waiting for an international agreement, Finance Minister Chrystia Freeland finally made a decision last June, announcing the immediate entry into force of the DST.
The United States had threatened Canada with trade retaliation at the time. It is now before a specialized tribunal created by NAFTA (North American Free Trade Agreement) that they are turning to find out how the law allows them to respond.
“We are not worried,” assures a source in Minister Freeland’s office, who sees this development as “another step in the process”.
The companies targeted are mainly the GAFAM – Google (Alphabet), Apple, Facebook (Meta), Amazon and Microsoft –, according to the Chair in Taxation and Public Finance at the University of Sherbrooke.
These multinational companies rake in profits that are in the trillions of dollars each year.
“Canada’s strong and essential social safety net is built on a strong national tax base, which depends on people doing business in Canada and paying their fair share of taxes,” said Minister Freeland and her colleague for International Trade, Mary Ng, in a statement.
The response from the NAFTA tribunal, renegotiated, will come no earlier than mid-November, the time for consultations on both sides of the border to take place.
Canada is not the first to throw this bombshell in the water. Austria, France, Spain, Italy, the United Kingdom, Turkey and India are all countries that have already adopted a similar tax.
However, “Canada is at a disadvantage compared to these countries, which have continued to collect revenue under their pre-existing taxes on digital services,” the ministers say.
This article is originally published on tvanouvelles.ca
