Empower Your Business to Generate More Revenue in Canada

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trade associations in the United States are calling on their government to fight back against Canada's new Digital Services tax the tax plans to add a three% levy on foreign Tech Giants that generate revenue from Canadian users but it's not just those in the US that are upset with this new tax the Ford government is also pushing back Ontario Finance Minister Peter Beth laly wrote to his Federal counterpart last week now is not the time for Canada to put a Target on its back unilaterally implementing this tax not only imposes new costs on our economy it could significantly harm our relationship with the United States Finance Minister chrisha freland responded to those concerns today we have specifically been working very hard and very collaboratively with the US and I am confident that a win-win outcome a negotiated win-win outcome for Canada and the US is absolutely possible Matthew Holmes is the senior vice president of the Canadian Chamber of Commerce and me now Matthew Holmes good to see you thanks for coming in see you you you you've been calling on the government not to go ahead with this now you think they should reverse the implementation of the Digital Services tax I mean how's this going to affect Canadian companies well part of the problem is we don't know how it will affect Canadian companies there's the business that other companies do here in Canada but there's also a lot of Canadian companies that could be captured within the net of this new Digital Services tax and there could be further retaliation against Canadian companies that export to the Us and other markets the the tax seems to be designed though to capture large Global multinational companies that you need to have more than a billion dollars in global revenues and 20 million of that anything excess of 20 million dollars in Revenue in Canada is taxed at 3% so isn't this precise enough that it's only going to hit the big digital Giants Well it's certainly targeting big digital Giants but it could actually affect many others so loyalty programs within Canada Canadians love their travel loyalty points those could be impacted our travel sites that we use quite frequently those could follow within uh the thresholds that have been identified here and further it invites retaliatory uh action from the United States it's uh it seems provocative particularly doing this right before July 4th and uh there have been strong concerns raised by us trade representative Ambassador Katherine Tai Ambassador David Cohen here in Ottawa has also raised concerns and we just see this as h a provocation at a very sensitive time with the us but you know the US has kind of been seen as holding this up right because Canada wanted to do the the global uh deal on this through the oecd and through other G7 U you know mechanisms and it never got there and a lot of has been resistance in the US and the US Congress so can a country like Canada just wait for the US's approval on something like this when the UK France and Italy and others have already gone ahead well many other countries are waiting they're working together at that multilateral table at the oecd um Canada has always been uh a country that really Prides itself in following the rule of law and working at that m multi-jurisdictional level and so it seems uh it seems strange and surprising that Canada would choose to move unilaterally like this particularly with that sensitive and very very special relationship we have with the United States is it unilateral though when the UK has done it ger uh France has done it Italy has done it I mean other G7 Partners have moved in this direction and they're not facing trade retaliation of of any consequence it seems sure some of them moved and it was before some of that oecd pillar conversation was taking place so there was already those early movers France is a good example what we saw in France they put this tax in place that immediately was pushed on to Consumers so this will be inflationary Canadian consumers will see prices go up in our opinion and they also invited uh retaliation from the US or the threat of retaliation from the US so how do you reconcile this though because these companies do business in Canada but because they're situated elsewhere a lot of their activities which are quite lucrative and quite profitable they're shielded from a lot of tax I I I mean is it just the way this is being done is the very idea of a digital Services tax that that you have discomfort with no I think uh I think that's a valid conversation taking place around a digital Services tax and how is that done in a global and a consistent way and I think that's exactly the conversation that's supposed to be happening at the oecd table and that the countries at that table have agreed to extend the timeline on Canada has stepped out of that process and said no we're going to move alone we're going to use this as either a pressure tactic or we're just we're just doing it outright the other concern we have though which is a very specific one on this is the tax is retroactive so imagine David you you've followed the law you've paid your taxes and then suddenly you're told oh no there's a new tax and it you owe it three years retroactively you owe back taxes for something that didn't exist beforehand and that's a concern for us from the business perspective it creates uncertainty and that affects investment in Canada it affects the environment to attract investment in Canada it's retroactive but retroactive to a point where these big companies would have been told this was uh coming right like it goes back to about 2022 and the government has been signaling for a number of years it was moving in this direction so if you're Amazon or Google or Facebook you would have seen this coming and perhaps already baked it into your planning would you not well again companies have to follow the rule of the land in which they do business at that time and they're they're accountable to their shareholders as well so the government says a lot of things it says it wants to do a lot of things many of them aren't done or it reverses on those things and so I don't think you can really run a business today based on signals or press releases or even just something a minister says in a in a press scrum you have to actually base it on what are the rules of the land and this new law or this new tax is being put in place three years retroactively so it's coming in as you say primarily this let's be blunt it primarily targets big American tech companies I mean that's really who people are talking about here and as you say it comes in right before the July 4th holiday but also in the middle of a pretty intense presidential election cycle and and you know on cycle Senate and Congressional elections I mean what are your concerns in terms of the the political Fallout from a move like this given the intensity of what's happening in the United States right now well we feel it's provocative we feel that the signals have been sent by our most important trade relationship or our trade partner uh that they have concerns about us moving in this way it sends the signal that we're more willing to take you know the 1.4 billion a year that this represents uh for the Canadian coffers and jeopardize the trade relationship which currently is about 600 billion a year in exports to the United States so we're chasing literally two pennies on every dollar that we're currently uh selling down to the US right but you know it is it is $1.4 billion right it is money that Canada feels it's entitled to because of the economic activity happening inside its borders and the oecd process while Canada still says it's committed to that it's going slow and it keeps going slow and keeps pushing it off and pushing it off and pushing it off and that's all just reprieve for these companies um who get to keep making money without paying the tax right so Canada has at some point to act well we're looking at that I mean look uh you could have everybody around the world all of the jurisdictions put in place their own little taxes and and the system quickly breaks down what what we would like to see is a consistent and coherent approach to this being taken the other thing to keep in mind is these companies are putting a lot of money into the ecosystem here they're they're supporting creators and Artisans through uh marketplaces they're putting money into Canadian content they're putting money into journalism uh many of these same companies are facing multiple new taxes they've they've contributed to HST or GST uh there's there's all kinds of other things so we're not arguing against uh a tax per se we're talking about process here and about how provocative Canada really wants to be at such a sensitive time with the US relationship well it it seems though I mean the order in council has been posted the tax has been implemented and we heard from the Deputy Prime Minister and Finance Minister Chris Freeland today and it sounds like they're quite content with this decision so absent big retali ation from the United States which is often threatened but doesn't always happen what do you think the federal government is going to do about your concerns here well I think it's what uh Canadians uh do with this we're going to see prices go up in a in a time of inflation we're going to see businesses potentially face retaliation in terms of our export relationship with the US and of course as we have potentially a new Administration coming into the us we're going to be facing or setting a tone in 2025 that is right before the review of our most important trade relationship uh our Trade Agreement in with kusma uh and so that that tone that we're setting could really compromise the ability for us to to have a good faith and Good Will negotiation across the table or review with our trading partners Matthew Holmes senior vice president with the Chamber of Commerce thanks for your time today sir thank you David some business groups are calling on the federal government to reverse a controversial Digital Services tax the 3% tax will apply to foreign Tech Giants that generate revenue from Canadian users it's a move the government says means more tax fairness but has some Canadian business associations crying foul this will be inflationary Canadian consumers will see prices go up in our opinion and there could be further retaliation against Canadian companies that export to the Us and other markets in the current situation Canada is worse off from some of our allies allies who are not facing any retaliation that's just not fair it's just not okay for Canada and Canadians it's not in the National interest the US ambassador to Canada David Cohen released a statement on the 4th of July saying the US trade representative has noted its concerns with Canada's Digital Services tax and is assessing and is open to using all available tools that could result in meaningful progress toward addressing unilateral discriminatory Digital Services taxes so will Canadians pay a price for going it alone on this tax the power panel is with me Cameron dead Zan belgi James Moore and T mles So Cameron chrisan Freeland would argue they're not going it alone right the UK France Italy have Digital Services taxes without retaliation uh the trade relationship though between Canada than the us a little bit more substantial uh than those countries they're going ahead with it she says it's about fairness what do you think think of the play well I think she has a strong winning argument on her side and sounds like we're losing out right now especially if other countries are have already imposed a tax on let's remember some of the biggest most profitable multinational corporations in the world who operate in Canada as you noted in your interview with uh the chamber rep earlier um who don't pay the share of taxes that they should be paying and I think this is a winning argument for the government if they get ahead of it something that struggle to do sometimes uh is allow other people to own the narrative here I think it's really important to come forward with a really clear strong argument say we're on the side of Canadians we're on the side of working people these are massively profitable huge corporations who should be paying taxes just like they do in other countries we don't represent the United States or their business interest we represent you and this is something that's legit what if it leads the higher costs on things like your Digital Services like it has in France for example that's I mean that's an argument for any tax right it just I think it's pretty intuitive for people to understand that these huge companies like Amazon or meta are already making enormous amounts of money and they should be contributing to uh the country that they work in so so Tonda the argument has been that uh at least from Christi Freeland today is that we were losing out as a country it's about fairness that they pay and they have been signaling this for years and talking about it but then always sort of like deuring when asked when are you going to implement it and then lo and behold an order in council just gets published and there's no announcement it's just their press conference it's just there you know what what do you make of the way this was brought into Force it's it's strange well to Cameron's point there hasn't been a a strong argument to boost support for this kind of a change um and it's no surprise that the Ontario Finance Minister uh representing a government that is in favor of cutting taxes would argue against such a thing um but the government the Canadian government hasn't made its case very publicly very well and even you know I've read some stuff that some experts have written about this particular plan and and they too are baffled by some things look it's not just going to hit big American multinationals potentially could also hit uh Canadian Digital Services companies um although some of that is even unclear but Shopify lbls and and and Canadian Tire in Hudson's Bay who offer online marketing Services as well could they be hit um how do you justify that well one way the government might be justifying it is that you know what they might take in in a digital Services tax could pay for about a year of dental care um you know they don't talk about things in concrete understandable terms to make their case but I think that to say simply that oh other countries do it also doesn't give Canadians the benefit of having the information that Canada is doing it differently our tax the proposed taxes broader it's going to cover more potentially more companies and and takes a whole different tax it's higher than the tax that France imposed and even in that case the US did threaten retaliation against France so also not to be underestimated is there is a very real threat coming now from a democratic Administration but nobody should fool themselves that Trump wouldn't absolutely Go full in and and Levy perhaps 100% tariff on some certain Canadian Imports that's a real threat but Zane there is a consensus across a lot of countries that that that these companies do need to face some sort of consistent application of Taxation because they do Commerce in countries but they're based in other countries so they there's a lot of tax avoidance there because of that setup they' been working Canada head with the G7 and the oecd for years but it kept getting held up and America was a big part of it how long do they wait do you think they can sell this do you think they they're at risk uh for doing this they could be at risk and and I don't love you know the the chrisop freelin argument because while I agree with cramon that the facts are on her side the message here you know is kind of weak to say that other jurisdictions have done this and not face penalty to me that simplifies as we're going to tax them because other jurisdictions have and we're going to get away with it because they have and I feel like you know that is logically cogent that's probably a good internal bureaucratic argument but to tunda's point this should have been a coalition building exercise for the Liberals big Tech should have been the focus here not the taxation instrument and it should have been a conversation on big Tech and impacts to communities positive and negative but they should have been the square on enemy here if they wanted to frame it in those militaristic terms and it should have been about what do you get as a result of it instead we're talking about a tax we're not talking about what a tax will oxygenate for us as a society T of brings up Dental Care you know they could even have microt targeted even further to say this is what it could mean for your community what it could mean for certain jurisdictions this is how you build coalitions and this is how you try to sell something that should have been frankly you you know a a a open net goal because big Tech if you look down at in the United States is one of the few non I was going to say nonpartisan but one of the few multi-partisan issues that Democrats and Republicans have gotten in line with and and we had a chance here to do that but instead we're talking about the tax not who it's waged against and not what it can benefit Canadians and I think that was a huge Miss on on the messaging here and I think we're going to pay for it for that reason not the fact that we're we're stepping ahead in front of an oecd broker deal which is still you know potentially on the rails so so so James it's not surprising to see the business Community pushing back against the idea of any kind of an increased tax uh but we all are also seeing it from the US trade representative there's concerns of this being done in a contentious election cycle and with the NAFTA uh soon up for review the NAFTA agreement you were on the NAFTA Council last time I what are your thoughts on on the potential risk there well to me that's the most important lens of all this you can put any of these lenses we've put on it and analyze from that but I think in the macro look I think as a parliamentary budget officer assessed that this tax at its peak would bring in about 1.5 to 1.7 billion dollars in Revenue per year into the government of Canada big number a bigger number is $2.5 billion doar which is the amount of two-way trade that happens between Canada and the United States every single day so the relationship between Canada and the US well we can pick singular fights on particular issues whether it's Supply management or or intellectual property or U you know tariff access on certain goods and so on the macro relationship is enormously important the protectionist movement in the United States is bipartisan it exists in both parties in the the form of Donald Trump that has jingoistic and racial elements relative to Mexico it's got you know promising tariffs on automobiles coming from China which would then bleed into Canada he's put tariffs in Canada before with Joe Biden it comes in the form of of their anti-inflation measures which were enormously damaging to Canada and our ability to access opportunities in the United States so here we are sort of picking a fight over $1.7 billion when we have a two and a half billion dollar per day relationship with the United States that's going to be renegotiated in the next 24 months so I mean you talk about dimes holding up dollars and and risking a macro relationship for a Pretty Petty fight uh about you know going after Global Tech giants look the Canada US relationship is not the same as the Italy us relationship it's not the same as the Netherlands or the Paraguay us relationship which is what Minister frein has compared us to it's much bigger much more important and should be dealt with much more strategically but James on that macro argument you're making if it really is 1.5 to$ 1.7 billion that micro number compared to the Daily trade is it really big enough to be that big of an irritant I guess is my question apparently so the US USR the US Senate the US House of Representatives ambassadors current and former have all flagged this and it's not just us big business you just had on your show the Canadian Chamber of Commerce the Canadian Chamber of Commerce by the way is a confederation of all the small Chambers of Commerce all across this country they're not big business they're not it's the small businesses across the country through the chamber have come together and said don't do this it hurts us too so listen to Canadian business not American Business while you're doing your assessment is my message to minister Freeland Cameron what's your thoughts on that I think James makes some very strong points but I I would remind everyone that this government is no stranger to dealing with both two administrations Democratic and Republican and very serious threats to both our trading relationship and tariffs many other things that they've put in front of us and has managed to navigate it better than almost any other country in the world and come out in a pretty good situation um so I think that they are well equipped to do that again and to Zayn's point and anda's point on the messaging I think they're absolutely right I mean this is a winning argument for the vast majority of people to say big corporations should be paying their fair share and here is what you get out of it here are all the important programs we need the revenue to pay for this is going to make a difference in your lives when these massive companies can absolutely afford to pay a little bit more when they operate in our country T we got a B minute left last word you cuz you're you're my hometown and your hometown and you know I I I do Wonder uh what impact this will have on overall sort of the the tech Innovation sector in this country too right like it it layers on another cost of doing business for them will that be passed on to the users or consumers of any Services look that's that's to be determined I guess but the government has also not shown itself to be unafraid of going after Tech or digital Giants in the past um you know they early on they weren't so successful in a Netflix streaming tax or whatever it was back in those days but here we are in a world where they're regulating and taxing and uh you know big big Tech and digital Giants um and also trying to regulate content uh on those platforms as well so I think they're unafraid of those battles I just though to James's point I think I would be wary about picking which battles you fight right now especially if there's a multilateral international effort to to coordinate a taxation approach okay uh we got to leave it there I I want to thank you all even James who said I was full of it with the first topic we were talking about here I appreciate just the topic all right thanks for the power p t mcch Charles James mois zvi and Cameron Amad