Take hard line on Canada's digital tax, online laws, tech associations urge Biden

WASHINGTON -

A high-tech industry coalition in the United States is urging President Joe Biden to take a hard line against Canada's approach to digital services.

The group says the proposed digital services tax unfairly targets U.S. companies and is offside with international efforts to establish a global standard.

In a letter to Biden, they also complain about two controversial federal bills: the Online Streaming Act, known as Bill C-11, and the Online News Act, or Bill C-18.

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They warn C-11, which is meant to protect Canadian content providers, could backfire and ultimately increase costs to consumers.

And they fear the Online News Act, which would compensate Canadian news organizations and broadcasters, could violate the U.S.-Mexico-Canada Agreement.

Biden is meeting Prime Minister Justin Trudeau later this week as part of his first visit to Canada since taking over the White House in 2021.

"We are concerned that Canada is pursuing a number of problematic proposals and actions that could significantly limit the ability of U.S. companies to export their goods and services and fairly compete in the Canadian market," the letter reads.

"It is critical for the United States to hold Canada accountable to its USMCA commitments to ensure the continued success of this important agreement."

The letter is signed by 10 different associations in the digital services space, including the Computer and Communications Industry Association, the Information Technology Industry Council and the U.S. Chamber of Commerce.

First and foremost in their sights is Canada's "discriminatory and retroactive" digital services tax, which the group estimates would collect US$4 billion over five years, primarily from U.S. companies.

The tax, designed to ensure tech giants pay their fair share of taxes in countries where they earn revenue without a physical presence, would only take effect next year if a new multilateral tax framework doesn't take shape by then.

Canada has endorsed that so-called "inclusive framework," established under the auspices of the G20 and the Organization for Economic Co-operation and Development.

"Canada's pursuit of a DST would set a harmful precedent for other inclusive framework participants to adopt similarly targeted taxes on U.S. digital services."

Precedent elsewhere is also a concern with the Online Streaming Act, which the associations say smacks of an effort to impose on the internet a regulatory scheme designed for the "traditionally restricted world of broadcasting."

If passed, the bill "could have disastrous consequences for content production and distribution and could inspire other countries to implement similar content-preference schemes."

And they say the Online News Act, which is already fuelling mounting tensions between the federal government and tech giants like Google and Meta, appears to exclude digital companies from outside the U.S., a violation of the terms of North America's trilateral trade agreement.

"It is critical for the United States government to hold Canada to its trade commitments and to underscore the negative global precedent that would be set if Canada implements these measures in their current form."

 

This report by The Canadian Press was first published March 22, 2023.