As the government’s bill to update the Broadcasting Act and regulate big tech, C-10, looks increasingly unlikely to pass before the House rises later this month, Finance Minister Chrystia Freeland will be meeting with her G7 counterparts partners in the U.K. next week to further negotiate a deal to tax tech giants like Amazon, Google and Facebook.
In the April budget, Freeland confirmed her government will go ahead with a three per cent tax on big tech including Amazon, Google, Facebook and Apple beginning in January. According to the parliamentary budget office (PBO), that tax could raise over $4 billion in its first five years.
The government said in the budget it was moving forward with the tax to have big tech “pay their fair share of tax on the money they earn by doing business in Canada.”
But on Wednesday, following a year-long investigation by the U.S. on digital service taxes which some countries have already adopted, the United States Trade Representative Katherine Tai announced the U.S. would impose additional tariffs on certain goods from those countries collecting a digital service tax. Those countries include, Austria, India, Italy, Spain, Turkey and the U.K.
The U.S. also announced it would delay those tariffs for up to 180 days as negotiations continue around taxing big tech, among OECD and G20 countries.
“Today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future,” Tai said in a statement. (Section 301 of the U.S. Trade Act allows the government to impose tariffs if they determine a foreign government violates an international trade agreement or their actions are deemed unjustified or unreasonable).
If there is not a global deal on taxing these tech giants by January, Canada may face similar tariffs from the U.S. if it goes ahead with its digital service tax.
In a press conference on Wednesday, Freeland says she has discussed this issue with Janet Yellen, U.S. treasury secretary, and with her G7 counterparts and Freeland is optimistic they will reach a deal.
“We’ve been having good conversations among our partners,” Freeland said. “I want to emphasize again that the new U.S. administration and Secretary Yellen personally have taken an approach of compromise, and I think that really does mean a deal is within reach.”
Freeland added that the government is moving forward to put its digital tax in place in January, if the OECD or G-20 countries are not able to reach a deal because “we can’t wait indefinitely and so absent a multilateral deal, we will act unilaterally.”
Meanwhile, Netflix Canada has begun notifying its customers that due to a recent change in Canada’s tax law the federal GST/HST will be applied to their monthly bills. The government announced last month it would apply GST/HST to foreign-based subscriptions like Netflix, Amazon Prime, Spotify and Disney+.