Canada Opts for New Digital Services Tax

The media is reporting that Canada’s 2021 budget which was recently made public includes the idea of implementing a digital services tax (“DST”) that will be imposed on foreign businesses providing digital services to Canadians. This tax will, of course, apply to companies and services such as Netflix, Spotify and Amazon Prime, but also to other businesses that generate revenues through matching sellers with buyers online, dealing with user-generated content, advertisements through online platforms, and selling or licensing user data.

The rate of this new tax would be set at 3% of the income these businesses generate from digital services provided to Canadians. This, the Canadian government believes, will allow Canada to obtain its fair share of the revenues being generated from streaming and online services, which are often provided to Canadians by foreign (usually American) companies.

This new tax will come into effect on January 1, 2022, and is expected to bring in about 500 million dollars per year for the Canadian government. With figures like these, one has to admit it may be hard to resist for a country like Canada.