Jun 14, 2021
The Liberal federal government is moving forward with a digital-services tax (DST), which it is framing as an interim measure pending a global deal to update corporate tax rules for multinationals. In an interview with The Logic, Osler’s Patrick Marley, partner and co-chair, Taxation, commented that reaching an international consensus will be the start of a long implementation process.
“That agreement probably would not come into effect for several years,” says Patrick. “It is going to require both domestic law changes and tax-treaty changes” to implement the first pillar of the Organization for Economic Co-operation and Development process, which would reallocate some taxing rights to countries if companies have customers there, even if they lack a physical presence.
The federal government could choose to wait to lift its DST until a majority of countries have passed legislation enabling the changes and signed on to an international treaty, or hold out until all do so. “At a minimum, they would want the U.S. to be on board,” says Patrick.
Finance Canada estimates the DST will bring in $3.4 billion in its first five fiscal years. “It’s a fairly large amount of revenue that countries like Canada might be reluctant to give up,” he says, especially if a more limited version of the multinational tax overhaul yields less.
If you subscribe to The Logic, read more in the article “Ottawa’s ‘interim’ digital-services tax could be with us a long time” by author Murad Hemmadi.