Biden not concerned about Canada’s 3% tax on web giants, Trudeau says

Canada’s tax on Netflix and other foreign digital services companies may be a major irritant for the U.S. tech sector, but Prime Minister Justin Trudeau says it doesn’t seem to be much concern to President Joe Biden.

In a year-end interview with The Canadian Press, Trudeau said “not once” did Biden indicate that the digital services tax, which is set to go into effect on Jan. 1, was a significant worry for the White House.

The prime minister said he was poised to defend the policy, which is widely opposed on Capitol Hill. David Cohen, the U.S. ambassador to Canada, warned in October about the risk of a “big fight” over the three per cent levy.

“I understand that Americans may not be very happy that we are going to do it, but we have promised to do it,” Trudeau said. He said he was prepared with “all sorts of responses” had Biden raised the upcoming tax.

The measure is aimed at ensuring foreign tech giants that are generating revenue from Canadian users are required to pay taxes on that revenue in Canada. The bulk of those companies are based in the U.S.

“I think that, in all the conversations we had with the Americans, not once did President Biden raise that as a priority, a concern, directly with me.”

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The digital tax was part of the Liberal election platform during the 2019 campaign, but the government delayed its implementation until 2024 in order to give more time to global efforts to establish a broader, multinational taxation plan.

A version of the first pillar of that plan, drafted under the auspices of the G20 and the Organization for Economic Co-operation and Development, was released in October. But ratification, especially in the U.S., remains a long way off.

“We gave them several years to try to resolve, to figure out a way for them and for everyone,” Trudeau said. “They haven’t been able to do it. They tried.”

France and the United Kingdom have also opted to go it alone, a course of action Cohen and members of Congress have been lobbying Canada hard not to follow.

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Canada waited to proceed on its own because “the Americans were saying, ‘No, no, no, we have to do it with the OECD,”’ Trudeau said. The tax will be retroactive to income from activities in Canada dating back to Jan. 1, 2022.

“We’re not standing still because, as promised, we will implement our digital tax.”

Even without an international agreement on the multinational framework, Canada still needs to pass legislation to enact the measure before the January 2024 deadline. That bill has only started making its way through Parliament.

Canada views its proposed law as an interim measure, pending a breakthrough at the OECD that would address the realities of more than 100 countries.