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Canada Considering Digital Services Tax Targeting Largest Tech Companies

Canada Parliament

Canada’s Parliament is considering a tax on digital services revenue that would impact the world’s biggest tech companies.

The legislation would cover companies’ digital services revenue made from Canadian users, imposing a 3% tax on the revenue above 20 million Canadian dollars (about $14.5 million), Bloomberg reported Wednesday (April 17).

It would apply only to companies with annual worldwide revenue about $1.1 billion Canadian dollars (about $800 million), according to the report.

This proposed tax would begin to apply to calendar year 2024, would cover taxable revenues back to Jan. 1, 2022, and is expected to raise about 7.2 billion Canadian dollars (about $5.2 billion) over five fiscal years, the report said.

Because it would primarily hit U.S. firms, including Alphabet and Meta, American lawmakers have called for trade reprisals if the legislation is passed, per the report. Business groups in both the U.S. and Canada have also spoken out against the bill.

The Canadian government has noted that at least seven other countries — including the United Kingdom, France, Italy and Spain — already have similar taxes, according to the report.

Finance Minister Chrystia Freeland has said that the Canadian tax would not be enacted if a global tax treaty through the Organization for Economic Co-operation and Development were implemented, but that treaty has not yet been implemented by the U.S., per the report.

The move is expected to level the playing field for domestic companies competing against the tech giants.

Among the business groups opposing the legislation are the American Chamber of Commerce in Canada, the Canadian Chamber of Commerce and the U.S. Chamber of Commerce.

The groups issued a joint statement in February saying that the tax would be retroactive, discriminatory and in contravention of prevailing international tax principles.

“In both Canada and the United States, the livelihoods of our workers and the prosperity of our citizens depend on the North American Trade and investment partnership,” the joint statement said. “At such a sensitive time in the trade relationship, we hope Members of Parliament remain committed to multilateralism and the importance of a common approach to the North American marketplace.”