Taxing the tech giants might cost all of us more study claims

Montreal Economic Institute says businesses and consumers will pay the price

Taxing the tech giants might cost all of us more study claims
Steve Randall

Increasing taxes on large technology companies is something a growing number of jurisdictions are considering, including the UK, New Zealand, and Canada.

But according to a report from non-profit think tank Montreal Economic Institute, if Canada does slap a specific tax on firms such as Google, Amazon, Facebook, Apple - the so called GAFA companies – it would lead to higher costs for Canadian businesses and consumers.

"We sometimes hear that the GAFA enjoy more favourable tax treatment than large Canadian companies, but that's not true," says Peter St. Onge, co-author of the publication. “Far from escaping taxation, they are taxed substantially, at an average annual rate of 24% over the past ten years. The figures show that it is Canadian companies that were favoured compared to the American companies in the recent past.”

The taxation of large tech firms, proposed by all major parties in the federal election last year, is on hold during an OECD discussion; and some other countries including the UK are facing a backlash from the US if a tech tax is introduced; the US says it will implement punishing tariffs on cars and other products.

"In France, where a similar tax was imposed in 2019, a study showed that just 5% of the total burden related to the new tax will be shouldered by the big digital companies. More than half (55%) will be paid by consumers, and 40% by the companies using digital platforms," added St. Onge.

Canadian competitiveness
The report also argues that certain Canadian firms would also be impacted by a new tech tax.

With 13 Canadian companies (2016 data) in the digital sector having revenues of $1 billion or more, meaning they would be subject to the new tax; and 46 others approaching the threshold, the extra taxation could mean they struggle to remain competitive against US firms, which have benefitted from tax cuts.

"Raising taxes on internet giants may lead to consequences whose scope is hard to measure. In the form currently proposed, it will be an additional levy on taxpayers, which will do little to change the general situation. It could even entail a reduction in the quality of the services that millions of consumers appreciate and that they consume voluntarily," concludes Peter St. Onge.