Canada Will Soon Apply Proposed Tax on Big Tech Companies Amid US Oppositions

The Canadian government announced its plan to push forward its proposed tax on the world's biggest technology companies starting this year.

American lawmakers have been vocal about doing a trade reprisal that will primarily affect hit businesses in the U.S.

Canada to Enact Digital Services Tax for 2024

The digital services tax is part of Canada's strategy to ensure that tech giants are taxed appropriately for the revenue they are getting from their Canadian users. Moreover, the country is looking for ways to adapt to the fast-paced digital economy created by such companies.

"The tax would begin to apply for calendar year 2024, with that first year covering taxable revenues earned since Jan. 1, 2022," the Finance Department wrote in the recently published budget documents.

The digital services tax will set a rate of 3% for companies with a total global revenue of more than 750 million euros or C$1.1 billion. Companies like Alphabet and Meta are most likely to be affected by this change.

Canada's Revenue Expected to Increase in Five Years With New Tax Policy

Canada's parliamentary budget officer estimated that the tax that will be accumulated can raise the country's revenue by over C$4 billion ($2.97 billion) within the next five years. Other countries are also doing the same policy such as the UK, France, Italy, and Spain.

The country's decision arose from tax concerns about the rising digitalization of the economy. Canada is also committed to fair and equitable taxation while assuring that the country is capable of handling digital innovation and investment.

Meanwhile, U.S. lawmakers and government officials claimed that the tax was unfair to American firms. They also warned that retaliation is possible if Canada decides to push its initiative.

"We're either going to have agreement or we're going to have a big fight," said David Cohen, the U.S. ambassador to Canada in his October speech.