Finance Minister Chrystia Freeland tabled a package of tax measures Tuesday that includes provisions for a Digital Services Tax, a plan that is strongly opposed by business groups and the Biden administration.
The Liberal government first proposed a DST three years ago but has been delaying its implementation in the hope that an international deal would be reached that would determine how online-based multinationals should be taxed in the digital economy.
Ms. Freeland tabled a ways and means motion Tuesday, which is a precursor to a government bill that will implement parts of last week’s fall economic statement and remaining elements from the March budget.
The DST would be a 3-per-cent tax on certain revenue earned by large businesses from certain digital services. It is primarily aimed at large digital service providers such as Amazon, Google, Netflix and Spotify.
The motion does not specify when Canada will impose the DST, but Ms. Freeland’s comments to reporters Tuesday strongly suggested the government intends to have the tax take effect on Jan. 1, 2024. She left open the possibility of a last-minute global arrangement before the end of this year.
U.S. Trade Representative Katherine Tai, the U.S. Chamber of Commerce and the Business Council of Canada have all urged Canada not to move ahead unilaterally with a DST and to wait until a global deal is reached.
Many of the large global digital services companies that would be subject to the new tax are based in the United States.
Speaking with reporters, Ms. Freeland said Canada is currently at a disadvantage by not having a DST in place.
“There is a real fairness issue here because other countries, our partners and allies, like the U.K., like France, currently have a DST in place and that DST is raising much-needed revenue to support the British people, to support the French people,” she said. “The final thing I will say is that we always prefer finding a win-win outcome. And that is the case here and we have been having constructive conversations with our partners.”
The 2021 budget said the DST would eventually bring in $900-million a year in revenue once fully implemented.
Last week’s fall economic statement did not specifically update that figure. However, it included a section listing revenue from “other taxes,” which includes the DST and other policies. The timing of that accounting suggests the government assumes it will begin collecting DST revenue in 2024, though Ms. Freeland’s comments did not clearly commit to that timeline.
After international talks failed to reach a consensus on global taxation in the summer, Ms. Freeland said Canada would move forward with a DST as of Jan. 1, 2024, if no global deal has been reached by then under talks called “pillar one.”
“We have also always said that if pillar one did not come into force at the end of this year ... then Canada would have no choice but to introduce our own DST,” Ms. Freeland said Tuesday.
The government’s desire to bring in a DST in the absence of a global deal is one of several continuing sources of tension between Ottawa and tech giants. Ottawa is up against a Dec. 19 deadline to convince Google to take part in Bill C-18, the Online News Act, which is now law and is scheduled to take effect next month.
Meta has already declared the legislation unworkable and has removed news from its platform. Google has been seeking regulatory or legislative changes that address its concerns and has not ruled out removing Canadian news from its websites. The company had been hoping to see changes in an upcoming budget implementation bill, but the package of measures released Tuesday is silent on the Online News Act or Google’s requests on that front.
In addition to the DST provisions, Tuesday’s motion contains competition-related measures, such as increased powers for the Commissioner of Competition. It also includes details on the rollout of environmental policies for industry, such as a carbon capture and storage tax credit, and a clean technology investment tax credit.
The government said its clean economy investment tax credits will include labour requirements, such as ensuring workers are paid the prevailing wage.