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(Bloomberg) — Canadian Prime Minister Justin Trudeau’s government has authorized the implementation of a digital-services tax on large foreign technology companies, despite warnings of trade retaliation from the US.
A government notice posted online indicated the tax came into effect as of June 28. It will apply for calendar year 2024, with that first year covering taxable revenues earned since Jan. 1, 2022.
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The tax is a 3% levy on the digital services revenue a company makes from Canadian users above C$20 million ($14.7 million) in a calendar year. It would apply only to companies with annual worldwide revenue of more than about C$1.1 billion.
It will primarily hit major US firms, with Alphabet Inc. and Meta Platforms Inc. among those set to be impacted.
US lawmakers and government officials view the tax as unfair and have threatened to retaliate if Canada moved forward with it. Legislation including the tax passed last month, but the government had not decided when it would come into force, until now.
Trudeau’s government has noted that at least seven other countries, including the UK, France, Italy and Spain, already have similar taxes in place.
Canada’s parliamentary budget officer has estimated the tax would raise about C$7.2 billion over five fiscal years.
Finance Minister Chrystia Freeland has said Canada would not enact the tax if a global tax treaty through the Organization for Economic Co-operation and Development is implemented, but so far that treaty has not been ratified by the US.
News of the implementation of the tax was first reported by the Wall Street Journal.
—With assistance from Brian Platt.
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