Montreal, October 20, 2022 – The federal government’s bill to impose a surtax on the revenues of digital companies would hurt Canadian consumers according to a new MEI publication released today.
“No matter how the government dresses up its digital tax bill, it is Canadian consumers who will once again pay for it,” said Olivier Rancourt, Economist at the MEI and author of the publication. “Instead of taking even more money from our pockets, the government should reduce the regulatory burden, especially in a context in which inflation is eroding our purchasing power.”
The digital services tax proposed by the government would be a 3% surtax on the total revenues of companies in the online services field (social media, online sales, online advertising, etc.).
When France adopted a similar tax in 2019, the clients of the targeted companies saw their bills go up by two to three percent. An increase of between one and three percent in online service fees would cost Canadian consumers between $1.1 billion and $3.3 billion a year, according to the MEI’s calculations.
According to government projections, the tax would bring in $3.4 billion over five years.
A tax in response to a nonexistent problem
The government’s goal with its digital services tax is to make large tech companies “pay their fair share,” in the same spirit as the proposed multilateral agreement on minimal taxation for the Web giants. The agreement’s proposed minimum rate is 15%.
Over the past five years, the Web giants had an average effective tax rate of 24% in Canada, or nine percentage points higher than the proposed minimum.
“The data don’t lie: Digital services companies already pay more than their fair share as defined by the government,” said Mr. Rancourt. “This tax proposal responds to a nonexistent problem. The government should realize that it’s on the wrong track and reject this harmful proposal.”
The complete MEI publication is available here.
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The Montreal Economic Institute is an independent public policy think tank. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
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