Canada plans to introduce a digital services tax on major tech companies, such as Google and Amazon, to address the challenge of taxing profits booked in low-tax countries. According to the federal budget released on Tuesday, this decision is expected to generate C$5.9 billion ($4.3 billion) over five years starting from fiscal 2024/25.

Canada postponed implementing taxes on tech giants like Google and Amazon for two years to await global talks on multinational taxation. However, negotiations are progressing slowly, with the US objecting to the proposal, claiming it unfairly singles out American companies. The tax would be implemented starting from the 2024 calendar year, covering revenues earned since 1 January 2022.

Why does it matter? 

Tech giants such as Amazon, Apple, and Google have faced criticism for tax practices that involve booking profits in low-tax countries such as Ireland and Luxembourg, as reported by Silicon UK. Allegations of tax avoidance have spurred global discussions, prompting nations, including the EU, to consider their digital services tax legislation. OECD negotiations reached an agreement for a 15 percent minimum corporate tax rate, but implementation is delayed until at least 2024 due to slow progress on technical details.