Canada announces plans to imposes digital tax on tech giants in 2022

Canada announces plans to imposes digital tax on tech giants in 2022

According to reliable sources, Canada’s Finance Department is planning to impose a digital tax on multinational technology giants from the year 2022. The new tax will come into effect from January 2022 and will remain in place until major nations come up with a coordinated taxation approach on technology corporations.

Starting in the 2021-22 fiscal year, the new tax policy will reportedly help in raising federal revenues by USD 2.6 billion (CAD 3.4 billion) over the next five years in an effort to recover from the economic crisis stemmed by the ongoing COVID-19 pandemic.

Canada’s unilateral move to impose digital tax comes amidst delay concerns while reaching for a multilateral agreement with Organization for Economic Cooperation and Development, sources claimed.

Foreign-based investors, which have no physical presence in Canada, will also be required to collect sales taxes on products such as online video gaming and streaming as well as mobile apps. Sources confirmed that this move will aid in raising USD 923 million (CAD 1.2 billion) in the next five years.

Finance Minister Chrystia Freeland was reported saying that the country’s citizen would expect a tax system which is fair. She added that the country will act unilaterally to apply taxes on multinational digital companies in order to ensure they pay their share like other businesses operating in Canada.

Canada is also planning to impose sales tax on short-term accommodations. In this context, the Canadian government claimed that digital platforms that support such rental accommodations do not have to levy the taxes.

In addition to this, the government is planning to clamp down on the award of stock options in order to prevent high-income individuals from taking unfair advantage. Reportedly, an annual limit of around CAD 200,00 will be applied to stock option grants for affluent individuals.

However, it is worth mentioning that the cost of digital goods and services which are sold by foreign companies are likely to increase under the new taxation plan by the Canadian government.

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