Canada is pushing the G20 to speed up its timeline for setting new rules for taxing the digital economy, but will not take action before an international consensus emerges.
The European Union and Australia are considering interim measures that would change the tax rules for large digital companies such as Amazon, Google and Facebook but Canada will not be joining those efforts.
Finance Minister Bill Morneau outlined Canada’s position on digital taxes Friday during a phone call with reporters from Bali, Indonesia, where he is attending meetings of the G20, the International Monetary Fund and the World Bank Group.
Mr. Morneau also said that he discussed U.S. tariffs on Canadian steel and aluminum with U.S. Treasury Steven Mnuchin while in Bali. The minister suggested a resolution to the dispute was not imminent given that both sides have not reached the stage of detailed discussions on a solution.
For years, G20 leaders have promised to take action on fighting tax avoidance by large multinational corporations with clear standards for taxing corporate profits and collecting sales tax on digital sales that cross international borders.
The G20 and the Organisation for Economic Co-operation and Development have set a 2020 deadline for setting these new rules, and a report has been promised for 2019. The EU and Australia have taken steps to prepare interim measures, but the United States opposes such efforts.
Mr. Morneau said Friday that he would like to see an international agreement before the 2020 deadline.
“We’ve been pushing hard to make sure that report is done as rapidly as possible,” said Mr. Morneau. "Some countries are considering moving ahead more rapidly. Our goal is to try and do this in a co-ordinated fashion with other countries. That, we believe, is the best way to move forward.”
The debate is focused on whether taxation should apply in the jurisdiction of the customer or the company, which may not have a physical location in every country in which it sells digital services.
As of Jan. 1, different approaches to that question will apply within Canada’s borders. Quebec is planning to force online services such as Netflix and Google to collect sales tax from its Quebec-based customers. Mr. Morneau has not endorsed a matching national policy, even though the Liberal-dominated House of Commons trade committee recommended such a move in April.
The large digital multinationals also take different approaches to the issue. Some of them have been announcing revisions in light of the continued focus on whether or not they are paying their fair share of taxes.
In August, Facebook announced that it will start charging sales tax next year on some Canadian businesses who buy advertising on Facebook and Instagram. The company had previously announced that it is moving to a model of reporting advertising revenue in each country where the spending occurs.
On the issue of steel and aluminum tariffs, which were not resolved as part of the recent United States-Mexico-Canada Agreement on trade, Mr. Morneau said he had a positive discussion with Mr. Mnuchin but that he could not predict when the matter will be resolved.
“We’re not at a stage where we’re in detailed discussions on how we can actually get through this,” he said.
Bill Curry