A Liberal government plan to tax the digital services of major tech companies may end up costing Canadian consumers over $3 billion per year, according to a new paper released by a Canadian think-tank.
“No matter how the government dresses up its digital tax bill, it is Canadian consumers who will once again pay for it,” said Olivier Rancourt, an economist at the Montreal Economic Institute (MEI), and the author of the new paper.
The new tax, which is aimed at tech giants such as Google, Amazon, Facebook and Airbnb, was unveiled in the 2021 budget and is set to be implemented in 2024. When a “Netflix tax” was floated in 2015, which would have seen consumers facing an additional tax for such services, the Liberals joined the Conservatives and NDP in vowing to not implement such a thing.
However, the Trudeau government now plans a workaround where they say it is the company and not the consumer that will pay for the digital services tax (DST). The tax works out to 3% of gross revenue for companies with Canadian revenue of over $20 million per year.
“The revenue targeted is that from online marketplace and advertising services as well as from social media services and user data,” Rancourt’s paper explains.
The MEI research explores how a similar tax was introduced in France several years ago and what resulted was lower than anticipated revenue combined with the tax being passed on to consumers.
“If we consider a price increase similar to Apple’s or Amazon’s in France, with the tax entirely passed on to consumers, the loss would then be close to $3.3 billion a year, even before considering the losses in investment and productivity which will in turn affect all economic sectors,” Rancourt observes. “These costs for Canadian consumers would thus be nearly equivalent to the hoped-for revenues from the tax over five years, namely $3.4 billion.”
Last year, Google spoke out against the tax, claiming in a statement that it “would undermine the multilateral consensus and raise prices for Canadians. We hope [the Liberal government] will reconsider.” The Liberals have previously signalled that they consider the DST a stop gap measure until more international standards are implemented for taxing large tech companies.
While the DST is distinct from Bill C-11, which has been dubbed the Internet censorship bill, it remains one of several plans the Trudeau government has to bring about greater government involvement in online activities.