While Canada was preparing to force technology giants like Google, Amazon and Meta to pay their just part of taxes for their activities on the Canadian market, the Liberal Party of Mark Carney capitulated in front of Donald Trump by eliminating the digital services tax, thus renouncing about 7 billion dollars in five years. This flip-flop follows Canada’s decision and other G7 members to exempt US multinationals from the world’s minimum tax rate of companies, which will deprive them of additional billions of dollars in tax revenue. Multinationals have long escaped tax by transferring their profits outside the countries where they carry out their activities. During the tax period, they declare that the income earned in Canada were received in other countries, which allows them to avoid paying their contribution. Consequently, each year, the Canadian government loses approximately $ 4 to 5 billion in tax revenue, which could be used to finance essential public services such as health and education.
Many countries have realized that international cooperation was the best weapon to tackle the problem of tax havens and the transfer of profits. In 2021, after several years of negotiations, more than 130 countries approved a solution to two pillars and began to develop a legislative measure to apply the agreed rules. The first pillar focused on the taxation of digital services, while the second aimed at establishing a minimum world tax rate of 15 % for multinationals. Before the election of Donald Trump, the United States opposed the pillar of taxation of digital services, but supported the minimum world tax of multinationals.
The previous liberal government has established a minimum world tax for multinationals and the digital services tax aimed to collect these revenues from web giants. The digital services tax was to apply to companies that have more than $ 20 million in income, thanks to the provision of services, such as online advertising or shopping, to Canadian consumers (as well as the marketing of their data). In reality, at present, these profits are not imposed.
However, Monday, behind closed doors and at the request of Donald Trump and his entourage of billionaires, Mark Carney canceled this tax. In exchange for this favor, he only obtained the continuation of commercial negotiations with an unreliable partner.
This cancellation follows the G7’s decision to exempt American multinationals – most of which are the same web giants – of the global minimum tax rate of companies in exchange for the withdrawal by Donald Trump of a provision on tariff reprisals in his bill. According to the announcement of the Canadian government, the decision promotes international tax cooperation by implementing a “negotiated” solution, but in reality, it compromises the effectiveness of the agreement.
The SCFP and other trade union organizations have been excluded from negotiations, thus preventing workers from deciding on this agreement which could have a significant impact on their employment and retirement.
When governments favor the interests of private companies to the detriment of tax equity, they compromise their ability to invest in public services and offer support that workers and communities need in the event of a crisis. The SCFP therefore asks the federal government to restore the tax on digital services and include workers in commercial negotiations.
