Canada To Collect Digital Service Taxes From Netflix, Amazon Prime, And More

The new tax will go into effect on January 1, 2022.

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The cost of digital services and goods sold by foreign companies like Netflix, Amazon Prime, and Spotify in Canada will be rising by 3% starting on January 1, 2022, according to The Hollywood Reporter. The announcement solidifies plans that were being publicly explored by the country's finance department off and on throughout 2020--and was initially explored as a way to offset the pandemic's impact on budgets.

"The government is committed to ensuring that corporations in all sectors, including digital corporations, pay their fair share of tax on the money they earn by doing business in Canada," the Canadian government said when releasing its latest federal budget (via THR). The government also forecasts it will raise roughly $2.72 billion in revenue over the next five years, or $544 million annually.

In a November 2020 economic update reported on by Reuters, Canadian finance minister Chrystia Freeland said the country "will act unilaterally, if necessary, to apply a tax on large multinational digital corporations, so they pay their fair share just like any other company operating in Canada." It was also made clear that these new rules will not apply to startups or emerging companies--and that there's an interest in preventing "high-income individuals employed at large, long-established, mature firms" from exploiting other tax loopholes.

Dwayne Winseck, a media industry researcher at Carleton University in Ottawa, told the CBC in December 2020 that while this legislation has become highly politicized and has been derisively nicknamed the "Netflix tax," the goal for this is to "create a level playing field."

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