Canada's proposed digital tax may face 'vital penalties,' U.S. Congress committee warns

OTTAWA — Dozens of members of the US Congress are warning Canada’s plans to impose a unilateral digital providers tax on Huge Tech is a “dangerous” selection that might harm U.S.-Canada relations.

In a letter Tuesday, 41 members of the Home methods and means committee stated “Canada’s unusually aggressive and discriminatory strategy would goal U.S. corporations and staff who would disproportionally bear the burden of this new tax.”

The warning comes two months after the Liberal authorities confirmed it might to go forward with the tax, regardless that 138 different nations and jurisdictions agreed to delay comparable measures of their very own. The Liberals took that transfer amidst an ongoing battle with Google and Meta over laws that may power the 2 corporations to share revenues with information publishers.

The digital providers tax, first promised within the 2021 funds, targets giant corporations that function on-line marketplaces, social media platforms and earn income from internet marketing, reminiscent of Amazon, Google, Fb, Uber and Airbnb. It would herald $3.4 billion over 5 years, based on estimates. If carried out, it might be retroactive to 2022, leaving the Huge Tech corporations with a invoice of greater than $1 billion.

The Canadian tax is an alternative choice to a multilateral course of on the OECD, meant to exchange unilateral digital providers taxes established by particular person nations. The OECD settlement units up guidelines enabling nations to tax the most important multinational digital corporations and establishes a minimal world company tax.

The Canadian DST would solely take impact if the OECD strategy isn’t in place by 2024, however this summer season OECD nations stated they might delay these plans by one other yr — Canada, Belarus, Pakistan, Russia and Sri Lanka have been the one nations to not agree.

On the time, Washington, D.C.-based U.S.-Canada and worldwide commerce and tax consultants stated Canada’s place may break what was a “fragile” worldwide deal, whereas David Cohen, the U.S. ambassador to Canada, warned his nation may goal digital commerce if it decides on retaliatory measures.

Gary Hufbauer, non-resident senior fellow on the Peterson Institute for Worldwide Economics, advised the Nationwide Publish the delay was to provide the US an opportunity to implement part of the OECD deal, however he doubted the U.S. had the political will to take action.

In Tuesday’s letter, the members of Congress stated they have been “dissatisfied that Canada is sadly shifting towards this world consensus with a punitive DST scheduled to take impact subsequent yr.”

They urged U.S. Commerce Consultant Katherine Tai, Treasury Secretary Janet Yellen, and Karen Enstrom, who leads the U.S. mission on the OECD, to “impress upon your counterparts in Canada that its unilateral strategy is discriminatory and, if enacted, may face vital penalties.”

The letter additionally says Canada’s plans increase “critical questions” about Canada’s obligations underneath the USMCA and WTO commerce agreements.

“Given our prolific buying and selling relationship with Canada, its retroactive DST proposal can be particularly damaging to U.S. business and staff,” the letter says. “Due to this fact, we strongly encourage the Biden administration to work with Congress on motion to safeguard our financial system and problem these unfair practices, together with via our commerce agreements and home commerce statutes.”

Katherine Cuplinskas, spokesperson for Finance Minister Chrystia Freeland, stated in an emailed assertion the federal government “has been clear for a number of years” that it might go forward with the tax as of Jan. 1, 2024, “if a worldwide settlement just isn’t reached. And we’re dedicated to defending Canada’s nationwide financial curiosity.”

She stated “Canada’s precedence and desire has at all times been a multilateral settlement.”

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