The US on Tuesday announced its opposition to Canada’s proposed tax on the largest technology firms, warning that it “would examine all options” should Ottawa go ahead with the levy.
The US Trade Representative (USTR) said that Canada should instead work toward implementing a global taxation agreement that Organisation for Economic Co-operation and Development (OECD) countries announced last year to defuse the global tech tax row.
“As Canada is fully aware, the United States has serious concerns about measures that single out American firms for taxation while effectively excluding national firms engaged in similar lines of business,” the representative said.
Photo: AFP
It called for Ottawa to “focus efforts on engaging constructively” with the OECD negotiations, “instead of pursuing a counterproductive unilateral measure that risks encouraging other countries to follow suit.”
Should Canada go ahead with the tax, the “USTR would examine all options, including under our trade agreements and domestic statutes,” it said.
Washington has hit out at digital services tax proposals globally, which it says impose discriminatory fees on US firms such as Amazon.com Inc, Apple Inc and Alphabet Inc’s Google.
The office of Canadian Minister of Finance Chrystia Freeland said that Canada’s preference has always been a multilateral pact.
“Canada has a clear national interest in this multilateral agreement, which protects against erosion of the tax base and will generate additional revenue” for the country, her office told Agence France-Presse in an e-mail.
“We sincerely hope that the timely implementation of the new international system” will make Ottawa’s proposed tax “unnecessary” to ensure the protection of Canadian interests, it added.
In October last year, nearly 140 countries reached an agreement on a 15 percent minimum tax under OECD auspices, leading the US to remove punitive tariffs on several countries ahead of the global tax’s imposition, which is expected next year.
Those levies were never imposed, but served as a threat to those countries that go ahead with their digital services tax.
Canada’s proposed 3 percent tax “on revenue from certain digital services” would affect companies with at least US$850 million in gross revenues and apply retroactively to the start of this year, although it would not come into effect until 2024, the USTR said.
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