At the age of 156, Canada is going through a rebellious phase.
Driving the news: Canada is one of just five OECD nations that refused to agree to extend a freeze on implementing a new digital services tax (DST) on big tech firms. The move puts it on a collision course with the US, which spearheaded the proposed measure
- Pausing the rollout until 2025 is meant to give the OECD time to ratify an ambitious set of new global tax rules, but Canada plans to enact its DST—which would target revenue foreign Big Tech companies make in Canada—by 2024. No exceptions.
Why it’s happening: Like a child waking up at 6 a.m. on Christmas, the feds feel they’ve waited long enough. They want the ~$4 billion the DST is estimated to generate over its first five years and are tired of falling behind OECD countries that already have similar taxes
Why it matters: Experts worry that the US will dispute the move under the CUSMA free trade agreement on the grounds that it violates national treatment and market access commitments, and could undermine the CUSMA’s future when it undergoes review in 2026.
Bottom line: Per the Financial Times, a sudden influx of DSTs could be an obstacle for the OECD’s new set of tax rules, since “having a patchwork of national measures would defeat the purpose of agreeing on a coordinated global fix.” But Canada has no plans to wait.—QH