Ontario Premier Doug Ford is calling on the federal government to pause its digital services tax, saying the levy jeopardizes the Canada-United States relationship and could have a detrimental effect on trade.
The digital services tax (DST)—which requires foreign tech giants to pay a 3 percent levy on revenues made from their operations in Canada—“is putting Canadian jobs at risk,” the premier said in a Nov. 4
statement.
The DST was implemented on June 28 following an
order in council by Finance Minister Chrystia Freeland. Google has implemented a 2.5 percent surcharge for ads displayed in Canada in response to the levy.
Ontario’s fall
economic statement, released last week, urged Ottawa to reconsider the levy, saying it would “increase the tax burden on many Ontario businesses” and have a “negative impact on a mutually beneficial trading relationship” with the United States.
Ford also spoke out against the tax in a speech last month, saying that the bipartisan consensus in Washington is that Americans are “furious” with Canada over the tax.
“I talked to Democrats, I talked to Republicans, and they are furious,” Ford said. “They’re furious with Canada over even considering what they view as an unfair tax on American companies. We cannot put millions of Canadian jobs in our historic economic partnership with the U.S. at risk because of a stubborn refusal to listen to the concerns of our American friends.”
Ontario Finance Minister Peter Bethlenfalvy wrote a
letter to Freeland this summer asking Ottawa to reconsider its implementation. He suggested the federal government implement the tax “carefully” so that it would not “risk isolating” Canada from the U.S. marketplace, “especially as we face the prospect of renegotiating the Canada-United States-Mexico Agreement.”
The
free trade agreement between the three North American countries created the largest free trade region in the world when it was signed in 2018.
The Office of the United States Trade Representative has since requested dispute settlement consultations with Ottawa under the trade agreement.
U.S. Trade Representative Katherine Tai has
described the tax as discriminatory and said it is inconsistent with Canada’s commitments not to treat U.S. businesses less favourably than Canadian ones.
Canada’s International Trade Minister Mary Ng and Freeland have remained steadfast about the tax, saying consultations will show “Canada is meeting its trade obligations.”
“Canada strongly supports international efforts to end the corporate tax race to the bottom and to ensure that all corporations, including the world’s largest corporations, pay their fair share wherever they do business,” they said an Aug. 30 joint
statement.
The digital tax was part of the Liberal’s platform during the 2019 election campaign.
Freeland said Canada had made a sacrifice by putting the DST on hold until the end of 2023 while the Organization for Economic Co-operation and Development (OECD) developed its solution for addressing the tax challenges arising from the digitalization of the global economy.
The intergovernmental organization’s plan to tax multinational corporations’ based on their activities rather than their location was still not complete by 2024, however.
“It’s simply not reasonable, not fair for Canada to indefinitely put our own measures on hold,” she said during a July press conference.
The finance minister noted several G7 countries, including the United Kingdom, France, and Italy, already have a DST in place and have not been “subject to U.S. trade retaliation.”
Freeland said Canada could benefit from the revenue the tax would bring in.
“As finance minister and deputy prime minister, I just can’t accept Canada indefinitely being in an inferior position to other countries who are partners and allies,” she said.
“I think we are all agreed as Canadians we have such a crying need for investment in so many things in our country.”
The Canadian Press contributed to this report.
