Canada Intends To Impose Tax On Digital Services, US Big Tech Objects

The US digital app company objected to the Canadian government's plan. (photo credit: pixabay)

JAKARTA - Canada said it was ready to impose taxes on companies that provide digital services if needed. This was confirmed by the Canadian Ministry of Finance, on Tuesday, December 14 in an announcement, which is predicted to disrupt Big Tech from the United States.

Canada unveiled the proposed measure in its budget last April and said it would stay in place until major countries come up with a coordinated approach to taxing digital giants such as Alphabet Inc's Google and Facebook Inc.

The Organization for Economic Co-operation and Development (OECD) has since agreed to a common approach to ensuring the companies pay their share of taxes, but an agreement to enforce this has yet to be implemented.

In a fiscal update, Canada's Ministry of Finance said the new tax would be imposed January 1, 2024, if the international treaty does not take effect. In that case, taxes will be payable on the income earned as of January 1, 2022.

"It is the government's sincere hope that timely implementation of the new international system will make this unnecessary," the update said, quoted by Reuters.

Google expressed its disappointment. “A move by Canada to impose a tax would undermine the multilateral consensus and raise prices for Canada. We hope they will reconsider," said spokesman Jose Castaneda.

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

"In a period of escalating trade tensions, this is another view of the United States," Mark Agnew of the Canadian Chamber of Commerce said in an email.

Canada last week also threatened to impose tariffs on a variety of goods from the United States unless US legislators reject plans to offer tax credits on American-made electric vehicles.

Minor trade wars between these two countries often arise, which sometimes heats up relations between the two neighboring countries.