In its most recent budget, the Canadian government proposed a 3% tax on, among other things, all digital platforms that are active in certain sectors and have revenues of over $20 million. This proposal has drawn strong criticism from the American government in recent days following the conclusion of an international tax agreement shepherded by the Biden Administration.
The implementation of such a tax would only hurt Canadian consumers, who would have to pay higher fees to access platforms like Netflix and Spotify. Moreover, it is believed this tax would lead to increased advertising costs for local companies, which would then be passed on to consumers in the prices they pay to purchase goods from them. Indeed, this is just what happened in France when Google announced a 2% increase in its advertising rates to “cover a portion of the costs of complying with France’s digital services tax law.”
This tax, like the one promoted by the Trudeau government, could be contested by the United States since it penalizes mostly American companies and is applied on revenues instead of profits, which goes against international taxation principles.
The economic nationalism behind this kind of tax is both outdated and ineffective. By trying to punish foreign companies that operate in Canada, our government will just end up hurting Canadians. While the intention might be laudable, the Trudeau government should consider the well-being of Canadian families which risk being the biggest losers from this tax. Far from affecting the profits of the companies targeted, this measure will instead take more money from Canadians’ pockets.