Canada to impose a 3% digital tax on U.S. Big Tech giants starting in 2022
Canada is set to impose a 3% digital tax on U.S. tech giants like Facebook and Google to help pay for mounting COVID-19 aid packages for the wider economy. The new tax would come into effect on Jan. 1, 2022, and remain in place until a common approach is agreed upon. The digital tax, which is expected to bring in around $2.6 billion (CAN $3.4 billion) over five years, will be used to help pay for mounting COVID-19 aid packages for the wider economy.
The Canadian government first made the announcement late last year. Canada Finance Minister Chrystia Freeland said the digital tax will apply to Facebook, Google, Airbnb, and others offering Canadians digital services and products. The tax will also stay in place until major nations come up with a coordinated approach to taxation.
In a message to the Canada House of Commons in Ottawa, Freeland said:
“Canadians want a tax system that is fair, where everyone pays their fair share … Canada will act unilaterally, if necessary, to apply a tax on large multinational digital corporations, so they pay their fair share just like any other company operating in Canada.”
Besides, the Canadian government also said that foreign-based tech companies with no physical presence in Canada will also have to start collecting sales taxes on products such as mobile apps, online video gaming, and streaming. Canada expects to raise an additional $958 million (CAN $1.2 billion) over five years.
As Reuters reported, the move to tax tech giants is separate from additional legislation being introduced to compel online video streaming companies like Netflix and Amazon Prime to contribute an unspecified portion of their local revenues to Canadian content programming.
Meanwhile, there is a silver lining in the news for tech startups. Canada Finance Minister Chrystia Freeland said that the rules will not apply to startups or emerging companies, which often cannot afford to pay competitive salaries and instead offer stock options.