Canada set to tax tech giants in 2024, sparking US complaints

Canada to Start Taxing Tech Giants in 2024 Despite US Complaints

“Canada is gearing up to implement a new tax on the world’s largest technology companies, sparking tensions with American lawmakers who are threatening trade reprisals against this levy targeting primarily US firms. The proposed digital services tax, currently pending legislation in Canada’s Parliament, is set to take effect in the year 2024.

## The Digital Services Tax Explained

The tax, a 3% levy on digital services revenue generated by companies from Canadian users exceeding C$20 million ($14.5 million) in a calendar year, will only impact firms with annual worldwide revenue of over C$1.1 billion. Major players like Alphabet Inc. and Meta Platforms Inc. are among those expected to feel the impact. The Canadian government justifies this tax by highlighting that several other countries, including the UK, France, Italy, and Spain, have already implemented similar measures.

According to estimates by Canada’s parliamentary budget officer, the tax is projected to raise approximately C$7.2 billion over five fiscal years. Finance Minister Chrystia Freeland has made it clear that Canada would consider not implementing the tax if a global tax treaty through the OECD is finalized. However, due to delays in ratifying this treaty by the US, Canada is moving forward with its plans.

## The US Response and Potential Impacts

US lawmakers and officials have condemned the tax as unjust towards American companies and have warned of immediate retaliatory action if Canada proceeds with its implementation. This has raised concerns about a growing rift between the two nations, with the US ambassador to Canada, David Cohen, signaling the possibility of a ‘big fight’ unless an agreement is reached.

In a show of solidarity, US Senate finance committee leaders have urged the Biden administration to take a firm stance against Canada’s digital tax. Business groups on both sides of the border have also voiced their opposition to the tax, calling on Freeland to reconsider.

As these tensions escalate, the implications of this tax on the technological landscape and international trade relations remain uncertain. Will Canada stand its ground in the face of American pressure, or will a compromise be reached to avoid a full-blown trade dispute? Only time will tell the outcome of this brewing conflict between two economic powerhouses.

©2024 Bloomberg L.P.”



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