Canada

Tax on Big Tech in federal budget will bring in $3.4 billion

Increased funds for broadband, small business tech use and promoting quantum tech and genomics

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The three-per-cent tax will come into effect on Jan. 1, 2022 and will apply to large businesses with gross revenues of more than $1.13 billion, and $20 million in “in-scope revenue associated with Canadian users.” The government expects to collect $3.4 billion over five years.

The tax will be replaced by an international version once the OECD establishes consensus on a multilateral digital services tax. The budget said Canada is “optimistic” about that process, which aims to reach an agreement by mid-2021. “However, multilateral discussions have been going on since 2013. That is why, while Canada’s hope and preference is for a multilateral solution this summer, whether or not a deal is reached, Canada intends to take action,” the document said.

The U.S. said three weeks ago it’s considering implementing tariffs on six countries that have adopted unilateral digital service taxes instead of waiting for the OECD process.

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Finance Minister Chrystia Freeland prepares to deliver the budget in the House of Commons on Parliament Hill in Ottawa on Monday.
Finance Minister Chrystia Freeland prepares to deliver the budget in the House of Commons on Parliament Hill in Ottawa on Monday. Photo by Blair Gable / Reuters

The budget also outlined spending on promoting digital and tech initiatives, including strategies to strengthen emerging tech sectors and help to move small businesses online.

It also adds another $988 million to the government’s fund for building out broadband internet connections to rural and remote regions of the country.

Fewer than half of Canadians living in rural areas currently have access to 50 Mbps internet service, the minimum the CRTC says should be available to all. The government has promised to extend that availability to 98 per cent of Canadians by 2026 and to 100 per cent by 2030, but advocates have called for those goals to be sped up as the COVID-19 pandemic hit and Canadians’ work, school and social lives had to move online.

The additional money will bring the total funding for the Universal Broadband Fund, which was launched last fall, to $2.75 billion. The budget document said the new funding will “support a more rapid rollout of broadband projects in collaboration with provinces and territories and other partners. This would mean thousands more Canadians and small businesses will have faster, more reliable internet connections.”

Tax on Big Tech in federal budget will bring in $3.4 billion

The government will also launch two initiatives to promote new technologies — a $360-million National Quantum Strategy and a $400-million Pan-Canadian Genomics Strategy.

Quantum technology, which is based on the principles of quantum physics, “is at the very leading edge of science and innovation today, with enormous potential for commercialization” including in areas such as drug development and battery technologies, the budget said.

The seven-year strategy will boost “Canada’s significant strength in quantum research; grow our quantum-ready technologies, companies, and talent; and solidify Canada’s global leadership in this area,” the budget said.

The budget also aims to boost Canada’s leadership in genomics, or the study of genes and their functions, with a five-year project. “Canada was an early mover in advancing genomics science and is now a global leader in the field. A national approach to support genomics research can lead to breakthroughs that have real world applications,” it said.

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(The seven-year strategy) will solidify Canada’s global leadership in this area

In 2017, the government launched a $125-million strategy to promote the artificial intelligence sector in Canada. Monday’s budget renews that program, outlining “up to $443.8 million over 10 years” for measures including attracting and retaining academics and to support the commercialization of Canadian AI innovation and research.

The government also pledges $1.4 billion to help small businesses to “digitize and take advantage of e-commerce opportunities” by matching them up with younger Canadians who can provide that training.

The government said the Canada Digital Adoption Program, could help up to 160,000 small and medium-sized businesses. It will give them access to help from “digital trainers from a network of up to 28,000 well trained young Canadians,” while businesses that need more comprehensive support will be able to get “advisory expertise for technology planning and financing options needed to put these technologies to use.”

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