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United States looking at all tools to respond to Canada's digital
services tax
(HTM) Source
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The Office of the United States Trade Representative says it will do
what's necessary to halt Canada's tax on large foreign digital
services companies.
Last month Parliament approved the government's plan to add a 3-per-
cent levy on foreign tech giants that generate revenue from Canadian
users. It means the companies will have to pay taxes on that revenue
in Canada.
Many of those companies are based in the United States and American
industry is demanding action.
The Computer and Communications Industry Association, which represents
many big tech companies including Amazon.com Inc., Apple Inc. and Uber
Technologies Inc., called on U.S. President Joe Biden's administration
to take formal steps under the U.S.-Mexico-Canada free-trade
agreement.
"With Canada's DST now law, the time has now come to announce action,"
said Jonathan McHale, the association's vice-president of digital
trade, in a news release.
It joined 10 other trade associations in sending a letter to United
States Trade Representative Katherine Tai urging a robust response.
An official in Ms. Tai's office said Monday they are open to using all
available tools.
The digital tax was part of the Liberal election platform during the
2019 campaign. Both the Conservatives and New Democrats also proposed
a similar levy.
The Liberal government, however, delayed its implementation in order
to give more time to global efforts to establish a broader,
multinational taxation plan.
A spokesperson for Finance Minister Chrystia Freeland said Canada's
priority and preference has always been a multilateral agreement.
"The Canadian government has been clear for several years that it
would move forward with its own digital services tax if a global
agreement is not reached," Katherine Cuplinskas said in an e-mail.
"And we are committed to protecting Canada's national economic
interest."
Other countries have brought in similar tools to tax the profits of
large multinational companies in the digital sector. But critics of
the Canadian measure wanted Ottawa to put it on hold to allow the
Organization for Economic Co-operation and Development additional time
to get the global framework in place.
However, that framework has seen significant delays, particularly from
the U.S. where moves to sign on to the agreement could remain stalled
by the political realm of a divided Congress.
David Cohen, U.S. ambassador to Canada, said discussions between the
U.S. treasury department, trade representative and the Canadian
finance department are ongoing.
"We continue to discuss our concerns with Canada and hope they can be
resolved to avoid having to speculate about what the U.S. reaction
might be," Mr. Cohen said in an e-mailed statement.
The U.S. Chamber of Commerce and American Chamber of Commerce said in
a news release last month that the Canadian tax is in contravention of
the global framework and international tax principles at "this very
sensitive time in the Canada-U.S. trade relationship."
The timing is problematic with a looming review of the Canada-United
States-Mexico trade pact in 2026, said John Dickerman, who heads the
Business Council of Canada's Washington office. It risks disuniting
Canada from an essential economic partner.
"You are kicking at a hornets' nest," Mr. Dickerman said.
If Canada puts itself in a position where it is alienating companies
and other countries, Mr. Dickerman said it becomes a less enticing
place to do business.
"It's not a time for us to be working against each other," he said.
"It's a time for us to be working together."
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