December 02, 2020

Andrew Campbell 

The pandemic caused various risks around the world. Economic slump is one of the risks. Canada recently proposed a plan to increase digital tax and hope to relieve the burden of economy. The Department of Finance expected to impose this digital tax policy on multinational corporations which offer online services from 2022. 

With the hit of coronavirus, the government of Canada expected to receive share tax from global organizations including Facebook and Google to compensate for the budget. However, this tax agreement is still under discussion. More details need to wait until the next years’ budget. 

Besides the corporation of Facebook and Google, companies that offer online services or products will also be the target to impose tax. Spotify with audio streaming and Amazon Prime Video are going to pay additional digital tax for this new policy. Therefore, this digital tax is also known as Netflix tax.

Minister of Finance, Chrystia Freeland, stated that the government of Canada wants to have a fair tax system, so everyone needs to pay fair share. Monthly subscription or product delivery is simple to calculate. However, it is difficult to calculate tax rate of online products services. The tax rate calculations will be subtle, if consumer purchased a video game with subsequent services. These additional services may not apply to every digital product. 

It might not be the fair tax system in the end. Experts predict that consumers will be the one to pay the digital tax to the government of Canada, not the multinational organizations. 

Photo:Webshot.