We just threw $7 billion onto Trump’s poker table—the expected five-year haul from the DST —simply to keep playing a rigged game with no clear end. What was gained here?
The money these companies earn from online ad revenues—and by selling our personal data (including our search habits)—is virtually untaxed. This is because, like many multinational companies, Google, Meta, Amazon, Airbnb and other online platforms can register their global profits in low-tax jurisdictions.
While U.S. officials in the Democratic and Republican parties accuse the DST of discriminating against U.S. firms—“to stifle American innovation,” according to Commerce Secretary Lutnick today—the tax would have applied to firms of any nationality, and only on revenues above $20 million.
Trade watchers have always suspected Canada was holding on to the DST mainly for negotiating purposes. It was something generally positive for Canada that could nonetheless plausibly be negotiated away for some meaningful purpose, perhaps in the planned six-year review of the Canada-U.S.-Mexico Agreement (CUSMA) that replaced NAFTA under the first Trump presidency. Prime Minister Carney admitted this was the plan in a press scrum today (June 30).
The Canadian government, in playing that card early, has depleted Canada’s digital sovereignty and federal revenues, for no apparent reason other than to keep Trump sweet. In doing so, we will undermine efforts in Europe and elsewhere to develop national digital services taxes in the absence of a viable international alternative.
Worse than that, the Canadian government has legitimated Trump’s pointless and highly destructive trade warfare at a possible turning point.
We should have just increased GST a small amount across the board instead of creating a tax had such a concentrated impact on businesses from one country who happens to be our most important trading relationship.
There are these things that Canada does to protect industry or raise funds, but there are consequences for the quite convoluted way we go about it. VATs are a normal thing around the world, but we engineer these weird solutions to try to hide our protectionism.
For example instead of raising taxes and subsidizing the news media as a public good, we made (certain) Silicon Valley companies pay (certain) publishers for linking to them. Facebook then said it just won’t link to them and now there’s no news on Facebook. This was a backfire.
Instead of GST we could have taxed lots of things, fiber internet plans, advertising or digital services across the board, many people warned against the Trudeau era bills, they caused a rift with Biden too, and we’ve now lost the game of chicken and wasted 4 years on something we had to tear up.Trade watchers have always suspected Canada was holding on to the DST mainly for negotiating purposes. It was something generally positive for Canada that could nonetheless plausibly be negotiated away for some meaningful purpose, perhaps in the planned six-year review of the Canada-U.S.-Mexico Agreement (CUSMA) that replaced NAFTA under the first Trump presidency. Prime Minister Carney admitted this was the plan in a press scrum today (June 30).
I’m really hoping they played this card right. It doesn’t feel like they did, but I hope Carney is playing on a level we don’t get.
From the Government point of view, it made more sense to let go a potential of 7B$ in revenue to save some Canadian jobs. It’s less damaging to do that and lose some numbers in a spreadsheet than seeing jobs in steel, automobile and other sectors lost, which require more work to bring back.
Also, these kinds of tax are normally reflected in higher price to the consumer, which doesn’t help when there’s no viable Canadian alternatives to turn towards to.
Not saying that I agree with the reason, and I’m not happy we lost that, but there’s a bigger picture.
I really hope it comes back. Best we can do now is stop using those services from US companies.
Because it’s a weak vassal state and it exists to obey the imperial core.
The nuclear wessels are in Alameda.
