Canada’s already-weak competitive position will erode further.
At a time when Canada is already mired in a productivity crisis, the Liberal government is moving ahead with a new tax on tech companies.
Dubbed the ‘digital services tax,’ it would be a 3% tax on the revenue of large tech companies operating in the country.
The Liberals – along with some other governments in the OECD – have been pushing for a tax on tech companies to be applied in all countries. However, those talks have stalled, so the Liberals are pushing ahead unilaterally.
There are questions however about whether this would be allowed under the revised NAFTA agreement, since the tax would mostly hit American-owned companies.
As reported by BNN Bloomberg, the U.S. has warned of retaliation if Canada goes ahead with the tax:
“U.S. Trade Representative Katherine Tai has asked Canada not to bring in its own DST, and business groups have expressed concern over potential trade repercussions if Canada ignores the American warnings.
Freeland said Canada would still prefer to see the OECD deal ratified, adding she has been discussing it with her Group of Seven counterparts and other ministers in attendance at the India summit.
“We did have some good conversations within the G7 and bilaterally on finding a path forward where international agreement can be reached, and the Canadian interests can be protected and recognized,” she said.”
The last thing we need
Canada’s competitive position has been steadily eroding.
Our standard of living is stagnating, as we fall behind peer nations on a per capita basis.
The debt burden of Canadian households also outpaces that of many comparable nations.
https://t.co/M7yCHvrG13 pic.twitter.com/6IvuxAgDHT
— Warren Kinsella (@kinsellawarren) July 18, 2023
As you can see, not only is our household debt the worst in the G7, it’s heading in the wrong direction.
So, the last thing we need is a new tax that will take more money out of the pockets of Canadians. And make no mistake, that is exactly what will happen. Tech companies will pass on the cost to Canadian consumers.
Additionally, a ‘digital services tax’ makes us less competitive economically. Attacking ‘big tech’ is a dangerously counter-productive move, given that embracing technology is essential to remaining economically powerful and prosperous.
Bill C-11 and C-18 are already making Canada look hostile to the tech industry, and the fear-based protectionist populism of the Liberal government will only ensure that Canada is increasingly left-behind by countries that have the courage to compete and embrace the future.
The irony is that the government seems to half-recognize this. Their program to open up 10,000 work permits for US H1-B Visa holders will bring many talented tech workers to our nation. It is a smart policy. But matching that policy with an increasingly hostile attitude towards tech companies is completely illogical.
In their effort to score short-term political points by ‘fighting big tech,’ and their desperation for more tax revenue, the Liberal government is doing significant damage to Canada’s long-term economic potential at a time when we need a pro-business, pro-tech, and pro-growth mindset to escape our current economic malaise.
Spencer Fernando
