The Canadian government has announced plans to impose digital tax on tech giants like Google, Facebook, Airbnb, etc.
The tax will come into effect from Jan 1, 2022, to give the companies time to register for, collect and direct to the federal government the GST and HST on their taxable sales to Canadian consumers. It will stay in force until a common approach on taxation is agreed upon by major nations.
It is estimated that this move will help the federal government collect around $2.6 billion in as revenues over the five year period. The government is all set to introduce new stimulus packages to mitigate the impact of the novel coronavirus crisis countrywide. The revenues earned from the digital tax will help in funding these packages.
“Canadians want a tax system that is fair, where everyone pays their fair share,” Finance Minister Chrystia Freeland told the House of Commons in Ottawa. She said,”Canada will act unilaterally, if necessary, to apply a tax on large multinational digital corporations, so they pay their fair share just like any other company operating in Canada”.
She also said that the big companies remain unregulated in Canada which puts homegrown enterprises at disadvantage.
The rule will apply even to foreign-based vendors with no physical presence. The government also plans to oblige people renting out short-term accommodation to charge sales taxes, saying popular digital rental platforms do not currently have to impose the taxes which puts hotels at a disadvantage.
This move by Canada can prompt other major nations to finalize a common approach to tax the web giants.
But there are concerns that this move can also face trade retaliation from the outgoing-Trump government. President Trump had previously threatened retaliation against any efforts to enforce such a taxation.
Komal is an English literature student with a keen interest in economic developments and politics amongst others. She is a part of Research & Content team at HrNxt.com