US voices ‘concern’ at proposed Canadian tax on tech giants

WASHINGTON (AFP) – United States (US) Trade Representative (TR) 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 three per cent digital services tax targets companies with gross revenues exceeding USD900 million in global business. The measure is expected to bring in CAD3.4 billion over five years and will apply until an “acceptable” multilateral agreement replaces it, Ottawa said.

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

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.

United States Trade Representative Katherine Tai giving a speech as US President Joe Biden looks on. PHOTO: AFP

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 – 10, then at a final meeting in October.

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 favour of Canada, but the US 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.