Trudeau’s digital line makes Canada’s muscles flex with Trump on the way out

Canada prepares to impose a unilateral digital tax on the income of large web companies – all based in the United States – A test Dynamic crossing new frontier following the election victory of President-elect Joe Biden.

Biden is expected to oppose unilateral digital taxes just like his predecessor. But his victory is widely expected to restore a neighborly tone and put an end to US tariff threats operating north of the border.

Just hard talk? A closer reading of the situation suggests that Canada does not really have to operate on a digital line alone – and this announcement may be more about posture than anything concrete.

The Liberal government has said it will impose a unilateral tax in January 2022, but only if international negotiations fail to reach an agreement aimed at finding a global solution to the problem. Negotiations are hopeful that an agreement can be reached by mid-2021.

Tip around Trump: President NAFTA provoked a major trade dispute by imposing sanctions on Canadian steel and aluminum during the talks. In the process, He even slammed Trudeau on Twitter, calling him “very dishonest and weak”.

From the outset, Trudeau was particularly wary of public appearances and comments. The Prime Minister of Canada is said to have rehearsed how to shake hands before the first meeting in February 2017 So he can come strong without opposing the president.

Behind the walk back: Trudeau’s liberals promised during Canada’s 2019 election campaign to impose a unilateral tax on Big Tech. But after winning the re-election, the government backed away from the pledge at a time when Trump threatened to unilaterally impose a tax on French goods in connection with plans for digital giants.

Washington has argued that the French digital tax will hurt American companies too much.

With almost certain attention, he said it was gratifying that the Liberal government had abandoned its campaign promise and waited for the emergence of a global digital tax deal from talks involving the 135-nation and Organization for Economic Co-operation and Development.

“The idea that Canada could move forward with an initial tax would have called for Trump’s fees,” University of Calgary tax policy expert Jack Minds said in an interview. Digital line.

“It simply came to our notice then [that] The Canadian government did not want to stab Hornet’s. I felt Canada was retreating from that place. ”

Bold Steps During a Biden Transition: Michael Keist, head of internet and e-commerce law at the University of Ottawa, said the Trudeau government seemed to be backtracking on its digital tax promise immediately after learning of the US response.

“Opposition to the French proposal is not surprising, and the same kind of opposition can be expected from the United States to the Canadian proposal, if it goes ahead,” Keyst said in an interview.

He warned that it would be a miscalculation on the part of Canada if it moved forward now, predicting Biden’s soft reaction.

“I have little reason to expect that the Biden administration will act or respond very differently to a unilateral plan to snatch tax revenue from the United States to another country,” Keyst said. “It doesn’t matter if it’s Canada, France or any other country.”

New approach: The Trudeau government’s digital tax plan lasted until recently.

Finance Minister Christiaan Freeland threw it out in her fall economic report, promising that the sluggish international talks would move forward unilaterally by January 1, 2022 if they failed to reach an agreement.

The tax, which Canada said would be waived if an international agreement is reached, is expected to bring in $ 3.4 billion in revenue in five years starting 2021-2022.

Freeland argued that Canada was “concerned about the delay in reaching a consensus” on the global digital line.

“We would love to work within the OECD to have a multifaceted approach to taxing the corporate revenues of multinational corporations,” Freeland told the House of Commons after the news release. “If that work is not done, Canada will act unilaterally. In January 2022, we will impose our own tax because that too is fair.”

When asked about the issue in a parliamentary committee last week, Freeland said international companies doing significant business in Canada and not paying corporate taxes on it, especially digital giants, were “really a stressful issue”.

Global Digital Line Image: Canada has been a part of the OECD-led complex for many years, aiming to find an international solution. G-20 leaders have instructed the OECD to conclude negotiations involving the United States by mid-2021.

Grace Perez-Navarro, deputy director for taxes at OECD, said last Tuesday that the deadline was a reality.

Negotiations were expected to end in 2020. When no agreement appeared, some countries said they would move forward with their own digital tax plans.

French Finance Minister Bruno Le Myre said in October that the country would reintroduce its digital tax as international negotiations slowed down to global negotiations.

France recently released tax bills to major U.S. technology companies, revealing tensions with the United States. The United States plans to impose billions of dollars on French imports starting next month.

In other news: The digital-tax debate is coming as technology giants are taking heat on many fronts worldwide.

In the United States last week, For example, Federal trust officials and dozens of states have filed lawsuits against Facebook seeking to break the Silicon Valley company. Both lawsuits demand that Facebook sell WhatsApp and Instagram.

Reaction from Digital Giants: When asked about Freeland’s digital-tax alert, a spokesman for Google Canada said in an email that the company supports a “comprehensive, international framework for how to tax multinational corporations.”

A Op-ed in the Globe and Mail last month, Co-authored with Facebook Canada Director of Policy Kevin Chan, called on governments to follow the OECD process, “establishing a common tax framework to ensure that countries can benefit from the domestic revenue generated by large multinational corporations.”

“This will clarify the rules for Canadian countries based on foreign-based global platforms and success abroad,” Chan wrote.