AUS
NZ
UK
CA
USA
IND
Summary
- Canada will impose a digital tax on companies providing digital services like Google or Facebook.
- This tax would come in force from January 1, 2022, and the federal government estimates to raise C$ 3.4 billion over five years from this digital taxation approach.
- Canada Revenue Agency’s fight against overseas tax avoidance and aggressive tax evasion will raise $1.2 billion to the federal’s coffers over five years.
- The Organisation for Economic Cooperation and Development (OECD) coordinates with digital giants, like Alphabet Inc’s Google, Netflix, Amazon, and Facebook Inc, to reach a common digital taxation approach.
Canada will enforce a tax on all digital service providers in the country from January 1, 2022. The amount raised by this digital taxation will boost federal coffers by C$ 3.4 billion in five years. This tax will continue till other countries come up with an organized taxation procedure, the Finance Department stated on November 30.
Foreign-based vendors with no physical existence in Canada will also collect sales tax on articles such as mobile apps, e-games, and online streaming services and apps. This taxation approach could raise C$1.2 billion over five years.
The Organisation for Economic Cooperation and Development (OECD) is coordinating on a common taxation approach to ensure digital giants, like Alphabet Inc’s Google, Netflix, Amazon, and Facebook Inc to pay their fair share of taxes as the coronavirus pandemic hits economies worldwide.
This decision on digital taxes was delayed as Canadian authorities were worried about any trade tariff retaliation from the outgoing Trump administration.
Finance Minister Chrystia Freeland, in her first financial update or so-called “fall economic update”, informed lawmakers that people want a fair tax approach, where everybody pays their dues.
The federal government is also fixing the distribution and awarding of stock options to avert high-income people employed at large, well-established firms from taking unethical benefits.
Effective from November 30, a C$ 200,000-annual cap will be implemented to stock option awards for high-income individuals. However, the federal government has not defined high-income individuals. This rule will add about C$200 million in federal revenues, the Finance Department estimated.
The digital tax rules do not apply to start-ups or emerging firms, which mostly cannot afford to pay high wages and instead provide stock grants.
Canada’s fiscal deficit is projected to touch C$381.6 billion in 2020 due to COVID-19 support plans, the finance department informed on Monday.
Meanwhile, the French Finance Minister has requested an immediate European Union retaliation if the US government moves ahead with its planned trade sanctions in January over a French digital tax.
The Trump government is likely to impose additional duties of 25 per cent on French cosmetics, handbags, and other products valued at US$ 1.3 billion by January 2020. The above statement came in the wake of France’s digital services taxation approach.
