Canada to Impose "Digital Tax" on Silicon Valley Giants

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The federal government expects to pull in around $3.4 billion over five years from Facebook, Google, Airbnb and others offering Canadians digital services and products.

Canada's federal government is set to impose new taxes on U.S. web giants like Facebook and Google to help pay for mounting COVID-19 aid packages for the wider economy.

"Canadians want a tax system that is fair, where everyone pays their fair share … Canada will act unilaterally, if necessary, to apply a tax on large multinational digital corporations, so they pay their fair share just like any other company operating in Canada," finance minister Chrystia Freeland told the House of Commons in Ottawa.

Freeland was unveiling a fall economic statement as her government set forth a new stimulus packages to mitigate the impact of the novel coronavirus crisis countrywide. Ottawa will initially seek legislation that forces foreign web giants to collect from their subscribers or customers the GST and HST, or a sales tax Canadians routinely pay on goods and services they consume.

The move to tax web giants is separate from additional legislation from Ottawa to compel online players like Netflix and Amazon Prime to contribute an unspecified portion of their local revenues to Canadian content programming.

Facebook and Google remain unregulated in Canada, unlike local broadcasters and cable players that contribute a share of their revenues to subsidize local TV production. And U.S. streamers like Netflix, Amazon and Apple are increasingly making Canada their latest home away from home to shoot originals as they take advantage of local incentives, soundstages and production crews.

The first-time taxation of foreign digital platforms and services will take effect July 1, 2021, to give Silicon Valley tech players time to register for, collect and direct to the federal government the GST and HST on their taxable sales to Canadian consumers, Freeland proposed.

Ottawa estimates it will collect around $1.2 billion in new federal revenues over five years from the move to collect the GST and HST. The feds will also look to collect federal sales taxes from fulfillment warehouses in Canada operated by Amazon and other e-commerce giants, short-term rentals via digital platforms like Airbnb, and "international corporate tax" collection to deter digital players funneling money through overseas tax jurisdictions.

Collectively, Ottawa is looking to bring in $3.4 billion in new revenue over five years through to 2026.