Canada’s plan to tax American tech giants leaves US ‘concerned’

US Trade Representative Katherine Tai on Monday voiced her “concern” to Canadian Trade Minister Mary Ng over the prospect of Ottawa imposing taxes on US tech giants.

In its federal budget presented in mid-April, the Canadian government confirmed its intention to tax, from January 2022, the internet platforms offering services in Canada in the absence of international regulation.

This 3% digital services tax targets companies with gross revenues exceeding US $900 million in global business. The measure is expected to bring in Can$3.4 billion over five years and will apply until an “acceptable” multilateral agreement replaces it, Ottawa said.

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Tai “expressed concern about Canada’s recently proposed digital service tax,” according to a statement by the office of the US Trade Representative.

On the international level, the Organization for Economic Cooperation and Development (OECD) is currently studying reforms to modulate corporate tax according to the profits made in each country, regardless of their country of origin.

That would target in particular the digital giants, who often pay taxes out of proportion to the income and profits they generate locally.

The OECD wants to obtain a global agreement in principle at the G20 Finance on July 9 and 10, then at a final meeting in October.

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The US representative and the Canadian minister also discussed the protracted litigation over Canadian lumber. Washington believes that this wood is sold below the market price to promote exports.

And Washington has imposed countervailing duties that Ottawa considers “unfair” and “unjustified.” The case was brought before the World Trade Organization (WTO), which ruled in favor of Canada, but the United States appealed the decision in September 2020.

Tai and Ng “agreed to continue to collaborate on addressing these and other issues, and to maintain an open line of communication,” the USTR statement said.