Canada waiting on other countries for new digital tax rules: Morneau

Canada has been “pushing hard” to speed up development of a plan for the G20 to “make sure that digital companies pay their fair share of tax,” Canada’s Finance Minister Bill Morneau said Friday, but Ottawa plans to wait for some amount of international consensus to emerge before it acts. Morneau told journalists on a teleconference Canada doesn’t plan to act alone on taxing digital services, even though some jurisdictions – the EU and Australia – are considering soon enacting controversial new taxes on digital companies. He said Canada is holding out for a new report from the Organization for Economic Cooperation and Development (OECD) that would set out a coordinated digital tax framework for countries, and warned that going it alone would hurt future coordinated action. “Our goal is to do this in a coordinated fashion with other countries,” Morneau said, when asked about the prospect of a new tax regime for digital companies. “That, we believe, is the best way to move forward, but we certainly hope the OECD moves quickly in their report so we can have a coordinated way to move forward.” “To the extent that countries move forward more rapidly,” he added, “they will make it more challenging for us to coordinate with an eventual common approach.” Morneau was speaking by phone from Bali, Indonesia, where the annual G20, International Monetary Fund and World Bank meetings are being held. A communiqué from the July G20 finance ministers’ meeting said the group is seeking a “consensus-based solution by 2020, with an update in 2019.” But Morneau indicated Friday Ottawa is pressing to see a plan before then. “We’ve been pushing hard to make sure that report is done as rapidly as possible,” he said. Not every country plans to wait for the OECD to move in unison. The European Commission proposed earlier this year the EU should bring in new tax rules for digital services – affecting big companies such as Alphabet Inc.’s Google, Facebook Inc. and Amazon.com Inc. The proposal calls for a three per cent tax on digital revenues, resulting in an estimated €5 billion in revenue a year (roughly C$7.5 billion) for member countries, according to the commission paper. This week, BBC News reported EU commissioner Pierre Moscovici said it’s possible a tax deal could be reached by end of this year. Australia is also considering mirroring those tax measures to bring in more revenue from the U.S.-based multinational tech giants, although amid that debate some tax experts have expressed fears of reprisal from the U.S. U.S. Treasury Secretary Steven Mnuchin has previously stated the U.S. “firmly opposes” tax proposals from other countries that would single-out digital companies. But Morneau said Friday his “sense from the Americans” is they want to see the new report and “make sure they have a fair tax system,” although he wouldn’t comment further. Morneau faces domestic political pressure to deal with taxing digital transactions that cross borders, and one province already plans to move out of step with Canada on taxing foreign tech giants. A Liberal-dominated House of Commons committee report earlier this year recommended Ottawa should apply sales taxes on “tangible and intangible products that are sold in Canada” – a recommendation the Conservatives opposed. For its part, Quebec is moving ahead regardless of what the rest of the country does. The province is introducing a so-called ‘Netflix tax’ of its own, effective in January next year. It defended the move in its 2018-2019 budget by saying it was acting on OECD recommendations, and estimates it will net the province $154.5 million over five years. Facebook Inc. meanwhile announced last year that it plans to start charging sales tax in local jurisdictions it operates in “countries where we have an office to support sales to local advertisers.” It confirmed to news organizations in August that it will doing that in Canada next year, as first reported by The Logic. — With reporting by Kyle Duggan at kduggan@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Canada waiting on other countries for new digital tax rules: Morneau

Broadcast | October 12, 2018

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Canada waiting on other countries for new digital tax rules: Morneau

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