| Picture: “Ontario Ministry of Finance, Queen’s Park, Toronto, Ontario” by Ken Lund is licensed under CC BY-SA 2.0.
The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, and the Honourable Mary Ng, Minister of Export Promotion, International Trade and Economic Development, issued a statement regarding the US Trade Representative’s request for consultations on Canada’s digital services tax under the Canada-United States-Mexico Agreement (CUSMA).
Here are key highlights:
SUPPORT FOR INTERNATIONAL TAX REFORM
Canada remains committed to international efforts aimed at curbing the corporate tax race to the bottom. The country advocates for ensuring that all corporations, including the largest global entities, contribute their fair share of taxes in the jurisdictions where they operate. This is essential for maintaining Canada’s strong social safety net, which relies on a robust national tax base.
PREFERENCE FOR MULTILATERAL AGREEMENTS
Canada’s priority has always been to achieve a multilateral agreement. The country continues to support the OECD’s two-pillar plan, which was agreed upon in 2021. Canada is actively working with international partners to implement this plan.
CHALLENGES WITH EXISTING DIGITAL SERVICES TAXES
Several of Canada’s closest allies, including France, the United Kingdom, and Italy, have already implemented digital services taxes. Canada faces a disadvantage as these countries have continued to collect revenue from their pre-existing taxes.
CANADA’S PROVISIONAL TAX
The Canadian government has consistently communicated its intention to implement a digital services tax if a global agreement on Pillar One is not reached. Despite various efforts, deadlines for an international agreement have repeatedly passed. Canada’s provisional tax will be rescinded once a suitable multilateral measure is in place.
ONGOING DIALOGUE WITH THE UNITED STATES
Canada has maintained close communication with American partners on these taxation issues over the years, including recent discussions. The new NAFTA provides an appropriate platform for further dialogue. These consultations reflect the unique and collaborative economic relationship between Canada and the United States. Canada looks forward to demonstrating its compliance with trade obligations and hopes for a resolution toward international tax fairness in the near future.
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