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Fiscal Update: Canada still plans to tax digital services

OTTAWA — Canada is still preparing to impose taxes on corporations that provide digital services, the Treasury Department said on Tuesday in an announcement set to upset the United States.

Canada announced the proposed measure in its April budget, saying it would stay in place until major countries come up with a coordinated approach to tax digital giants like Google. and Facebook Inc. of Alphabet Inc.

The Organization for Economic Co-operation and Development (OECD) has since agreed to a common approach to ensuring these businesses pay their share of taxes, but a treaty to enforce this has yet to be made. .

In a fiscal update, the Treasury Department said the new tariffs would be imposed on January 1, 2024 if the international treaty does not come into force. In that case, tax will be payable on the revenue earned as of January 1, 2022.

“The government sincerely hopes that the timely implementation of the new international system will make this unnecessary,” the update said.

Washington strongly opposes the idea. US Trade Representative Katherine Tai urged her Canadian counterpart to drop the proposal in July.

“In a time of growing trade tensions, here’s another look at the United States,” said Mark Agnew of the Canadian Chamber of Commerce by email.

Last week, Canada threatened to impose tariffs on a wide range of US goods unless US lawmakers vote to reject a plan to provide tax credits for US-made electric vehicles.

The update made no mention of the ruling Liberal party’s election promise to raise corporate taxes on the most profitable banks and insurers to help pay the costs of COVID-19 recovery.

The Liberals said they would increase the rate from 15% to 18% on all earnings above C$1 billion (US$793 million). Officials said more details would be available in next year’s budget.

(Reporting by David Ljunggren; Editing by Cynthia Osterman)

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