Skip to main content
Open this photo in gallery:

Liberal Leader Justin Trudeau, seen here in Peterborough, Ont. on Sept. 26, 2019, promised that his government would take a harder approach to taxing foreign tech giant than it did the past four years.Chris Helgren/Reuters

The Liberal Party promised Sunday to take a more forceful approach to taxing foreign tech giants than it did during its past four years in government, starting with a 3-per-cent tax on the income of large digital companies operating in Canada.

The party would “make sure that multinational tech giants pay corporate tax on the revenue they generate in Canada,” according to the Liberal platform, released Sunday. The Office of the Parliamentary Budget Officer, which reviewed the measure, said the tax would apply to “targeted advertising services and digital intermediation services” for companies with revenues exceeding $1-billion globally and $40-million in Canada. The tax, modelled after a French government proposal, would generate $540-million next fiscal year and rise by $60-million or more annually, the PBO said.

In addition, the Liberal platform stated the party, if elected, “will also work to achieve the standard set by the Organization for Economic Co-operation and Development” to ensure foreign digital corporations who sell into Canada collect and pay the same sales tax as Canadian counterparts.

During the last mandate Liberal Leader Justin Trudeau rejected the idea of levying a tax on Netflix and other foreign-based digital services, despite calls by the Liberal-dominated international trade committee to do so and put them on even footing with Canadian-based digital providers. During his tenure as finance minister, Bill Morneau said the government was holding off on any action until negotiations between OECD members were done.

Several observers said the Liberals now appear more determined to proceed on such a tax, particularly after Quebec and Saskatchewan this year imposed provincial sales taxes on streaming companies.

“I’m glad they’re finally doing something because a whole lot of other countries have acted on this,” said Toby Sanger, executive director with Canadians for Tax Fairness, an advocacy group funded by organized labour. “It’s a change of policy compared to what they had before.”

Tax policy expert Jack Mintz with the University of Calgary’s School of Public Policy, who has argued for a so-called “Netflix tax,” said the Liberal proposal “is rather brave; it means a lot of people will have to pay tax on their Netflix.” He said the move “makes a lot of sense” from a tax policy perspective but added, “I think it could be resented by a number of people,” particularly during a closely fought election campaign.

A spokesman for Google, which commands a sizable share of digital advertising sales in Canada, declined to comment. Google’s head of public policy and government relations Colin McKay last year testified before a House of Commons committee that if the government began charging sales tax on its services, “then we will take the steps like we do in every country, to collect it from our users who purchase things from us.”

Facebook spokeswoman Erin Taylor said: “We pay applicable taxes in the countries in which we operate, and this is true for Canada. New rules for the Internet should protect society while also supporting innovation, the digital economy and free expression. These are incredibly complex issues to get right and we welcome conversations with policy makers and legislators around the world, including" in Canada.

During the past four years, Mr. Trudeau actively courted foreign tech firms, warmly greeting the leaders of companies such as Google, Facebook, Salesforce and others at home and abroad and encouraging them to invest more in Canada. That rankled many Canadian-based tech companies who felt Mr. Trudeau often cared more about foreign technology companies than those based in his backyard.

But the tech giants have come under increasing scrutiny and criticism in the past two years for a range of issues, including tax avoidance, invasion of privacy and misuse of data. Other governments have imposed corporate taxes on tech giants, which spurred ongoing discussions through international bodies to develop a more consistent approach. “It’s become an important issue internationally and a big source of debate” Mr. Mintz said.

Council of Canadian Innovators executive director Benjamin Bergen, whose association represents more than 100 of Canada’s fastest growing technology-intensive companies, said in an e-mail: “Our members are focused on creating public and private wealth inside Canada and believe that foreign companies should also be forced to play by the same tax rules that homegrown firms play by.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

Follow the author of this article:

Follow topics related to this article:

Check Following for new articles

Interact with The Globe