Canada also introduces digital tax targeting Big Tech... US predicts direct confrontation

Canada has introduced a digital services tax that can be imposed on big tech companies. U.S. IT firms such as Alphabet and Meta Platforms are expected to be directly impacted. Conflicts between the two countries over this issue are likely to become inevitable.

The Canadian Cabinet announced late at night on the 3rd (local time) that the digital services tax applicable to big tech was introduced on the 28th of last month.

Going forward, IT giants must pay a 3% digital services tax on digital service revenues earned from Canadian users exceeding 20 million Canadian dollars annually. The tax applies to companies with annual global revenues exceeding approximately 1.1 billion Canadian dollars (about 1.11 trillion KRW).

The Canadian Parliament estimates that the tax revenue from digital services over five fiscal years will amount to about 7.2 billion Canadian dollars (7.3 trillion KRW).

The companies required to pay the Canadian digital services tax are essentially Alphabet and Meta Platforms. Katherine Tai, U.S. Trade Representative, and members of the U.S. Congress have warned that Canada’s introduction of the digital services tax could trigger trade conflicts.

Canada argues that at least seven countries, including the United Kingdom, France, Italy, and Spain, have already implemented similar digital taxes. Some analysts predict confusion due to differing tax laws by country surrounding the digital tax. A multilateral treaty on digital taxes, designed to prevent such issues, has stalled due to opposition from the United States.

Recently, Canada has been proactive in creating digital policies targeting overseas IT giants. Earlier, the Canadian Broadcasting and Telecommunications Regulatory Agency announced a plan last month to require foreign streaming companies such as Netflix, Disney Plus, and Amazon Prime Video to allocate 5% of their Canadian revenues to domestic broadcasting and content production.

This content was produced with the assistance of AI translation services.