On Tuesday, Canadian Finance Minister Chrystia Freeland expressed cautious optimism over the resolution of a disagreement with the US on Ottawa’s proposed digital services tax (DST) on major internet firms.
The goal of the digital services proposal is to solve the problem of taxing internet behemoths like Alphabet and Amazon.com, who may record their earnings in nations with low tax rates.
The proposed Canadian tax has been met with recurrent opposition from the US administration. Ottawa is encouraged to abandon the idea by Washington, which claims it unjustly targets out American companies.
We did have some excellent discussions on the DST when I was in Washington last week, including with officials. In Ottawa, Freeland told reporters, “I am cautiously optimistic that we can come to an understanding with our American partners.”
Earlier this year, Canada said that it was proceeding with its tax plan, having postponed it for two years in order to allow for a worldwide agreement on the taxation of multinational corporations.
A worldwide tax agreement has been difficult to negotiate, and in July, another delay was allowed to allow for more discussions. Other than Canada, all other countries with DST agreed to postpone enacting their taxes for at least a year in order to await the outcome of the global agreement.
According to Ottawa, delaying the implementation of the DST for an additional year would make Canada less competitive with respect to nations that have been generating income from their previous digital services taxes.