CAN-USA 2025 Tariff Strife (split from various pol threads)

[brihard]

It's not quite retroactive, at least not in the sense that companies couldn't have made decision on the basis of the tax. The Act simply stated that the tax, when it took effect, would cover the period from the date of introduction of the Act in Parliament going forward. Thus, the companies affected by this knew from the start what would happen and from what date, right off the bat. While the press and business lobbies calls that "retroactive", it is a well established concept of legislative effect that is not considered to be retroactive in law and is used extensively in tax matters (throughout the world, I might add) so that the taxed entities cannot use the time between introduction of the bill and its adoption to evacuate/hide/evade (use what term you may) the incoming taxation.

I can understand that, and I do see there being some logic to it. In this case though I’m still not particularly sold. Respectfully, to say that’s not ‘retroactive’ doesn’t really accord with the plain meaning of the words, though I recognize the legal nuance. You’re expecting companies to follow a law that’s not a law yet and may never be. Given the relative simplicity of the DST - it’s a straight levy on revenue - this isn’t a case where they could so easily restructure or hide assets.

But that’s a minor quibble on my part. As I said it would be a reasonable option for putting a concession on the table as part of larger trade negotiations.

 

[Humphrey Bogart]

Brave stance being in favour of multinationals being able to (or continuing to be able to) do business and access customers in Canada without paying taxes, continuing a tax break that similar Canadian companies don't get. I know Amazon, Google & Meta are truly hard done by, and not making THAT much money, so they deserve some slack, right?

And that was true even before POTUS47 came onto the scene lately.

Canada is uber protectionist and our laws dissuade competition. The Competition Act is a weak piece of legislation that hurts consumers and hurts rank & file Canadians.

We now have an economy where each sector is dominated by a small group of Oligopolies. I do believe it's part of the reason for our current malaise.

 

[Weinie]

If however we shift that to me purchasing goods from Amazon, in a lot of cases they simply have better prices.

Thus therefore.

 

[The Bread Guy]

Canada is uber protectionist and our laws dissuade competition. The Competition Act is a weak piece of legislation that hurts consumers and hurts rank & file Canadians.

We now have an economy where each sector is dominated by a small group of Oligopolies. I do believe it's part of the reason for our current malaise.

And giving Meta & Google a tax break that Canadian businesses don't get is going to change this, how?

 

[brihard]

And giving Meta & Google a tax break that Canadian businesses don't get is going to change this, how?

It's not, of course.

That said, HB's point about our dominant oligopolies is well founded. In some cases our geography makes it pretty inevitable. There would be benefit to Canadian consumers from opening the markets up more to foreign competitors in some sectors, providing the playing field is kept even.

 

[The Bread Guy]

... HB's point about our dominant oligopolies is well founded.

Agreed.

In some cases our geography makes it pretty inevitable.

Also agreed.

There would be benefit to Canadian consumers from opening the markets up more to foreign competitors in some sectors, providing the playing field is kept even.

In general, and in theory, yes, but I worry about the practice leading to Canadian companies getting swamped as Mega-corps turning up their dials 5-10% swallow up Canada's incremental market. USSR protectionism, no, but some would say a level playing field would mean everyone accessing Canadian markets play by similar rules.

As for the retroactivity, again, I think that could be put on the table, but if Price-Waterhouse had a piece on this last year ...

Canada’s unilateral Digital Services Tax forges ahead with retroactive effect

The Canadian government has enacted legislation to impose a Digital Services Tax on Canadian digital service revenue with retroactive effect. Beginning in 2025, select taxpayers will have reporting and remittance obligations in respect of in-scope revenue earned back to Jan. 1, 2022.

www.blg.com

... and other lobby groups the year before, it's hard to say it was a "surprise" or negotiation in bad faith on Canada's part.

 

[Remius]

Trump ends trade talks with Canada, resumes trade talks with Canada, ends trade talks with Canada, demands to know which European country is Canada

WASHINGTON, DC - U.S. President Donald Trump has publicly announced that he will cease all discussions with Canada over any new trade agreements, before immediately following that up stating that discussions have resumed despite never having stopped.

www.thebeaverton.com

Excellent coverage as always.

 

[Brad Sallows]

I have no problem with Amazon or Apple or Netflix or whomever competing in Canadian markets. It’s a good thing for consumer choice. Their Canadian sourced revenues should simply be treated similar in taxation to Canadian revenues from companies who are physically operating here.

Why only those? Why shouldn't every foreign business selling products into Canada be taxed this way?

 

[brihard]

Why only those? Why shouldn't every foreign business selling products into Canada be taxed this way?

I said “or whomever”. I believe the Digital Services Tax is nationality-agnostic. The most obvious and largest examples just tend to be American.

 

[KevinB]

So I’m a little confused. As I see it the major problem is part of the tax is that it mentioned advertising income. Clearly a Good or Sevice being acquired in a country can be taxed. I can’t watch my Amazon or Nexflix accounts in Canada because they are US accounts.

I’ve heard several different versions of the Bill, and maybe I’m misunderstanding part of it - but people who have a Canadian version of the accounts (Amazon, Netflix, Hulu whatever) are already paying for the service. The company is already taxed on their income from that service.

To me this seem simply to be an add on tax, trying to claim an arbitrary amount of extra tax dollars from advertising income.

Now I’m not an accountant, but generally taxes are on one’s net income, not every gross income stream.

 

[The Bread Guy]

The company is already taxed on their income from that service.

But who are they paying the taxes on the money they make to?

They send the sales tax they collect to Canada’s Gov’t like any other business.

Doing a bit of digging, it appears that company is paying payroll taxes, but nobody can find how much they’re paying on their sales. This from the G&M 2022 …https://archive.is/PhT4M

How many Canadian companies pay their payroll taxes but zero tax on their profit from Canadian sales? It may be more than zero w/Amazon, but we can’t tell. And if it was more than zero, and they’re opening their kimono a bit, I suspect they’d open it more if there was something to show.

One argument is that if they’re an American company, they pay taxes on their profit in the US - and part of that profit comes from ad sales.

The other is that if they’re making a profit in Canada, they should pay taxes on that profit in Canada.

I’m still learning too - and not an accountant - so happy to be educated if I’m getting it wrong too.

 

[Brad Sallows]

Once countries start reaching across borders, what is the limit supposed to be?

 

[The Bread Guy]

Once countries start reaching across borders, what is the limit supposed to be?

Some ask the same about stuff the US is doing, but good question to ask in all directions.

 

[RangerRay]

I just see that sooner or later the remaining adults in the Senate/Congress are going to come together and shut this shit down before the whole thing just comes crashing down.

AHAHAHAHAHAHAHAHAHAHA!!!


Oh, you were serious? Sorry, I thought it was obvious for the last 9 years that the Republican Party has become a personality cult wholly owned by the Trump family.

Canada is uber protectionist and our laws dissuade competition. The Competition Act is a weak piece of legislation that hurts consumers and hurts rank & file Canadians.

We now have an economy where each sector is dominated by a small group of Oligopolies. I do believe it's part of the reason for our current malaise.

I’m pretty sure it was Jen Gerson who referred to Canada as three oligopolies in a trench coat.

 

[RangerRay]

Again, Canadians should not be surprised by the American response to our Digital Services Tax. This is a bipartisan issue down there, and they have long signalled their distaste with this

Ignoring the Warning Signs: Why Did the Canadian Government Dismiss the Trade Risks of a Digital Services Tax?

There can be many reactions to the current battle with the U.S. over a digital services tax, but surprise should not be one of them.

open.substack.com

 

[Brad Sallows]

Some ask the same about stuff the US is doing, but good question to ask in all directions.

Sure they do, but what's their point supposed to be if we're pushing boundaries ourselves?

 

[Remius]

I missed this earlier.

Greenland awards Canadian miner permit for metal critical to defence industry

Greenland Resources given OK to explore for molybdenum as Arctic island and its mineral riches have become hot geopolitical topics. Read on.

financialpost.com

I wonder if that is a factor in the latest US tantrum…

 

[Humphrey Bogart]

It's not, of course.

That said, HB's point about our dominant oligopolies is well founded. In some cases our geography makes it pretty inevitable. There would be benefit to Canadian consumers from opening the markets up more to foreign competitors in some sectors, providing the playing field is kept even.

It's not only about the consumers either. It's about creating competition amongst business. Those companies that adapt will survive and those who do not will fail. It's about making our economy more dynamic and innovative.

 

[Brad Sallows]

What a peculiar people we have become. We want the prosperity of international trade, and then fret if the necessary outflow of money isn't balanced and taxed in some arcane way instead of just making this a really cost-advantageous country from which to do business. There will never be a completely even playing field from any major political party currently constituted; they all want to use taxation and subsidization in some way to shape winners and losers.

We don't need to follow the lead of the countries that are trying to form international agreements to eliminate jurisdictional tax competition among themselves. When we seek to create ways to tax new sources, particularly sources abroad, we should expect "challenge accepted". Undoubtedly we will whine then, too, when that happens.