Liberals Pledge To Move Ahead With Taxing Digital Giants

OTTAWA — Finance Minister Bill Morneau reaffirmed Monday that the Liberal government will move ahead to introduce a new tax on digital giants, despite possible blowback from the United States. 

The policy commitment comes one week after U.S. officials threatened sanctions on France — including possible tariffs up to 100 per cent on French wine and cheese — after concluding in a report that the country’s digital giants tax “discriminates against U.S. companies” such as Google, Apple, Facebook, and Amazon.

“We’ve been very clear that we want to make sure that digital companies pay their fair share of taxes in our country,” Morneau said.  

Watch: Will a digital tax sweep across the world? Story continues below video.

 

The Liberals pledged during the election campaign to introduce a three per cent tax on large, digital companies that record more than $1 billion in international revenues. Implementing the measure could generate $540 million in new revenue in the next fiscal year, rising to $730 million in 2023-2024, according to projections in the Liberal platform.

Morneau said one way to ensure multinational companies pay their corporate taxes in Canada is to move in synchrony with other Organisation for Economic Co-operation and Development (OECD) countries seeking to do the same.

Countries need to be cooperative in their approach to ensure international companies “pay their fair share of taxes and don’t find a way around it,” he said. 

Canada and other OECD countries are reviewing and updating domestic and international tax policies and rules in response to challenges raised by the increasing digitalization of the economy. 

An OECD proposal published in September suggested updating rules so companies that conduct “significant” business in a country pay corporate taxes — even if they don’t have a physical presence in that jurisdiction.

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There are concerns among some tech analysts that a sweep of uncoordinated measures targeting tech giants will lead to double taxes for some companies, which may hurt their growth. 

Heritage Minister Steven Guilbeault told reporters Monday the government doesn’t have specific companies in mind when it comes to its pledge to crack down on tech giants.

“I don’t think they’re being hit by anything,” Guilbeault said. “We’re just asking them to do their fair share just like everybody else who is participating in the Canadian system is doing right now.” 

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NDP MP Alexandre Boulerice pressed Guilbeault on the issue during question period, asking if the government intends to stick to its promise to tax digital giants.

Guilbeault responded by saying Canada’s laws were written before the internet and the government has made a promise to change them. The government will do it “in the first year of our mandate,” he said in French.

The move comes two years after the government scrapped a plan to tax Netflix and to exempt the U.S. video-streaming giant from Canadian content rules in exchange for a commitment to invest $500 million in Canadian productions. The deal was unpopular, particularly in Quebec.

Canada isn’t the only country following France’s lead on introducing new tax measures targeting multinational tech giants. Among others, Austria, Australia, Belgium, Spain, Italy, and the United Kingdom have similar plans.