Facebook, Google, Other Tech Giants To Face Digital Tax Starting 2022, Canada Says
Technology giants like Facebook Inc (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) will have to pay a digital tax in Canada beginning 2022, Reuters reported Monday.
What Happened: The tax on digital services will stay in place until nations can agree on a unified approach on taxation on the tech giants, the country’s finance department said, as per Reuters.
The tax would be levied beginning Jan. 1, 2022, and is expected to raise revenues for Canada’s federal government to the tune of $2.6 billion (CAD 3.4 billion) over a period of 5-years.
“Canada will act unilaterally, if necessary, to apply a tax on large multinational digital corporations, so they pay their fair share just like any other company operating in Canada,” said the country’s Finance Minister Chrystia Freeland, according to Reuters.
In addition to the digital tax, foreign-based vendors with no presence in Canada will also have to collect sales tax on products such as mobile apps, video gaming, and streaming they sell in the country. This measure is expected to raise $924.75 million (CAD 1.2 billion) over five years, as per Reuters.
The Canadian government also reportedly plans to levy sales tax on short-term accommodation rentals and said digital platforms that facilitate such rentals currently do not have to impose the taxes.
Why It Matters: Ottawa has chosen to move unilaterally in the imposition of the digital tax as it is concerned over delays in reaching a multilateral agreement being worked on by the Organisation for Economic Cooperation and Development, noted Reuters.
Facebook and Amazon.com, Inc (NASDAQ: AMZN) have also received a huge tax bill from French authorities who want millions of euros in a digital tax from United States-based tech giants.
The imposition of digital taxes by foreign governments has evoked threats of retaliation from the outgoing Donald Trump administration, Reuters reported.
Price Action: On Friday, Facebook shares closed 0.3% lower at $276.97, Amazon shares closed 0.85% lower at $3,168.04 and Alphabet Class A and Class C shares closed 1.83% and 1.81% lower respectively at $1,754.40 and $1,760.74.
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