(Ottawa) The new digital services tax that the Trudeau government wants to impose starting January 1 on large companies such as Google, Facebook and Amazon that do business in the country will bring in revenues of $7.2 billion over five years to the federal treasury.
This amount is twice as large as the Ministry of Finance’s projections, according to an analysis by the Parliamentary Budget Officer (PBO) published Tuesday. Federal mandarins estimated the revenue that this new tax should bring in over five years at 3.4 billion.
The Trudeau government has repeatedly expressed its firm intention to impose a 3% digital services tax (DST) that would apply to the revenues of large digital services companies starting January 1, 2024.
The tax would apply retroactively to income generated in Canada that has been pocketed since January 1, 2022. It would apply to income of $20 million or more that was earned by a company or consolidated group with a global turnover of at least approximately €750 million (over $1 billion).
“The PBO estimates that TSN will increase federal government revenues by $7.2 billion over five years,” the report states.
The PBO emphasizes, however, that these estimates contain “a high degree of uncertainty” due in particular to the little information contained in the financial statements of companies that would be subject to this tax. Parliamentary Budget Director Yves Giroux also expects these same companies to “adapt their services and prices according to the new law.”
Finally, he emphasizes that his analysis does not take into account the fact that the government will have to deploy additional resources to monitor transactions on Canadian soil, because this data is not currently collected.
Initially, such a tax was to be imposed in all OECD member countries. Negotiations to this effect were put on ice in the summer. It was then agreed to postpone the talks for a year. But Canada decided to go it alone. Finance Minister Chrystia Freeland announced in July that the Trudeau government would move forward with such a measure, which was announced in an economic update in November 2022, if Canada failed to reach a multilateral agreement .
However, members of the Joe Biden administration and groups representing business people in the United States and Canada have increased warnings that such a unilateral gesture by Ottawa could have serious consequences on relations trade between Canada and the United States.
Commerce Secretary Katherine Tai has been unequivocal on this in her discussions with her Canadian counterparts over the past few months.
In August, the United States Ambassador to Canada, David Cohen, indicated that the Biden administration will have no choice but to impose retaliatory measures if the Trudeau government does not change its tune in this matter. case.
The timing of this tax is also risky, according to the Business Council of Canada, because it comes as the campaign for the November 2024 presidential election really gets underway.
Robert Asselin, senior vice-president at the Business Council of Canada and former close associate of former Finance Minister Bill Morneau, argued that the Trudeau government is going to make “an unnecessary provocative gesture.”
“This is an unnecessary provocative gesture that will be met with retaliation from our most important trading partner. And on the multilateral level, the OECD process is not finished. Why not see it through and make the necessary decisions afterwards? All because the government is desperate for revenue. It is not in Canada’s national interest to offend the Americans on the eve of the renegotiation of CUSMA [new free trade agreement between Canada, the United States and Mexico],” said Mr. Asselin.
The Minister of Finance could table a bill in the House of Commons to implement this famous tax this fall as part of her economic and financial update. Everything indicates that this bill would obtain the support of the New Democratic Party, which concluded an agreement ensuring the survival of the Liberal Party, which is in the minority in the Commons, during the confidence votes. The Bloc Québécois also said it was in favor of imposing such a tax.
Asked about this on Tuesday, Minister Chrystia Freeland said Canada’s position “has not changed.” “At the same time, we continue to have constructive conversations with the United States. For Canada, we prefer to find a solution with our neighbors and we continue to work on that, but our position has not changed. »
