The Canadian government wants to impose a new tax on Amazon, Netflix, and other U.S. digital services companies based in Canada. Will they be able to afford it? Or will they have to pay the price?
00:00:00.000Welcome to the Candace Malcolm Show here on Juneau. My name is Chris Sims. I'm the Alberta Director for the Canadian Taxpayers Federation. Thank you so much for joining me as I'm filling in for Candace over the summer on Mondays.
00:00:14.840Now, it's actually a pretty newsy Monday for the day between Sunday and July 1st, Canada Day, for those who celebrate. Now, interestingly, we had this trade war go on again and off again between last night, Sunday night, and today.
00:00:33.060So here's what happened. U.S. President Donald Trump already had indicated that the digital services tax was a huge burr under his saddle. For those who don't know what that is, it's basically a tax imposed by the Canadian federal government on online and digital services companies emanating from the United States.
00:00:53.760So if they earned more than $20 million with an M, they would then be taxed on that within Canada. But here's the catch. It was retroactive back a few years, and it was going to cost those companies billions of dollars. So that was not going to fly.
00:01:11.160And for those who were saying, oh, well, here's Trump at it again, being mercurial. Actually, the Biden administration had a huge problem with this thing as well. They even had a special panel on this thing saying the digital services tax is unfair on our American companies, and we're not going to stand for it, Canada. So fix it.
00:01:30.100Here's the thing. Newly elected Prime Minister Mark Carney could have been the big hero of this story, because he could have made the very popular announcement saying, you know what? That was the previous government. That was the previous Prime Minister. I'm not into taxing your Netflix. I don't need to be up in your business taxing Amazon or Uber. Because here's the thing. Amazon would not eat this cost. Uber wouldn't eat this cost.
00:01:59.520Same goes for things like Spotify and Netflix. Ultimately, that cost would be passed down to us, to Canadian taxpayers. How much money? The federal government in Canada was planning on raking in around $6 billion over the next few years. So a billion-ish dollars per year on this thing. That's nothing to sneeze at.
00:02:23.720And so ultimately, it would be the strapped taxpayers, again, who would have to pay extra fees. And before you start thinking, oh, well, this is just for entertainment, you know, isn't Netflix a luxury?
00:02:35.560Number one, nearly half of what we make is already taken by various levels of government through taxes and fees and whatever levies, whatever euphemisms they want to tax on to a tax. It's a tax. So already about half of what you're supposed to be paid is going to various levels of government. So government can back off.
00:02:58.400Number two, this was very personal for people, right? What you choose to listen to through your streaming services can be something super enlightening. It could make you feel better at the end of the day. It could be Netflix where you're spending time with your loved ones. All of those things.
00:03:14.160What you're listening to and consuming for entertainment and news in some cases is a very personal choice. But here goes the government getting right up in your grill and saying, where's mine? All the time. But it wasn't just for entertainment and news. This would have affected companies like Uber, which of course provides driving services with an app. There's the digital service part. See what they're doing there?
00:03:38.440This would affect a lot of people, not just, you know, everyday business commuters, but also seniors that don't drive anymore. So you're going to be taxing grandma for taking an Uber down to her knee appointment. Good job, guys. But here's where it gets ridiculous.
00:03:54.620Carney, this is an own goal for Carney. Carney could have seen this mess coming and avoided it earlier. At the end of the day, he had to eat a lot of crow on a Sunday night and back down to Trump. So this is going to cause a lot of tittering going through the Canadian media. Ultimately, this is a good news story because it means taxpayers and people who use these services won't have to pay for this. But going forward, pro tip for Prime Minister Mark Carney.
00:04:24.620The other thing you announced just before the last election was the carbon tax tariff, meaning a tariff, an import tariff, put on things coming in from countries that don't have national carbon taxes.
00:04:39.660Investing is all about the future. So what do you think is going to happen?
00:04:43.800Bitcoin is sort of inevitable at this point.
00:04:46.260I think it would come down to precious metals.
00:05:15.360So if the digital services tax cost taxpayers or was about to cost taxpayers an arm and a leg and cause a trade war, what does Carney think his carbon tax import tariff on American stuff is going to trigger?
00:05:32.420And U.S. President Donald Trump once he gets wind of this.
00:05:35.640So pro tip, use this Netflix tax as a teachable moment for yourself and scrap the carbon tax tariff before this also blows up into a trade war.
00:06:08.560Joining me now from Saskatchewan is Brian Lilly.
00:06:11.860Brian, of course, is a Toronto Sun columnist, longtime member of the Parliamentary Press Gallery back in the day, good friend of mine, and host of the Full Comment podcast, which I strongly recommend people listen to.
00:06:26.920Insider Baseball, but it's one of the very few I would describe as mainstream podcasts in Canada that I listen to.
00:06:34.480Brian, thank you for taking time at your undisclosed location compound bunker in Saskatchewan.
00:06:40.800I'm at the outdoor bunker in Saskatoon, hiding out, yes.
00:06:45.480I'm in Lethbridge, and there's really, like, I can almost see you from my house because, you know, there's nothing in between us right now.
00:06:51.720Brian, I wanted to get your take on this enormous reversal coming from Ottawa, coming from Prime Minister Mark Carney, on the digital services tax.
00:07:16.240The digital services tax, by the way, it was passed in June 2024, took effect then, and with the rule that it would kick in on June 30th, 2025, but be retroactive to 2022.
00:07:33.420So the Americans have always had problems with this.
00:07:36.100The Biden administration had started a trade dispute panel over this.
00:07:40.700They say it violates Articles 14.4 and Article 15.3 of the Canada-U.S.-Mexico trade agreement.
00:10:08.480But by not putting it off, by throwing the trade talks into disarray, all of those jobs in the auto sector, in manufacturing, in what are the other ones?
00:10:56.020And this is the thing where it threatens so much more.
00:10:58.780Like, the whole idea of a digital services tax was already bad.
00:11:02.820But the fact that they fumbled this at the negotiation table at the last minute so poorly speaks volumes about their planning.
00:11:10.040Like, remember back, we were texting about this during the election.
00:11:13.720I still can't believe that a trade union, a pipe workers union, endorsed the conservatives, the blue team, federally, over this issue of ongoing tariffs and an industrial carbon tax, saying that the Americans are going to eat our lunch.
00:11:30.120And for Carney to be a former central banker on two continents and to have a PhD in economics from Oxford and still kind of make these fumbles at the very last bit at the goal line is pretty surprising.
00:11:45.260But just if I can add to that just quickly, we can't forget he also has private sector experience.
00:11:50.400He was at Goldman Sachs for more than a dozen years doing deals.
00:11:53.440He was also at Brookfield Asset Management for the last few years doing deals.
00:12:00.120And I'm sure that he looks at Donald Trump as some real estate huckster from Queens and looks down his nose at him.
00:12:07.440And he just got beaten by the real estate huckster from Queens.
00:12:11.720Yeah, I can see what just happened here.
00:12:14.900I wanted to touch on just the nature of the tax that we just narrowly avoided.
00:12:18.840I feel this kind of awkward situation where previously when Trump would, you know, wake up out of bed and start tweeting something, it would just, it would cost us money and it would be a big tariff war and be awful.
00:12:29.660But here we have something that at the end of the day is going to save taxpayers money because in Canada, Netflix was not just going to eat this cost.
00:12:38.020Amazon was not going to eat this cost.
00:12:39.960And it went further than just stuff that you're doing on your laptop.
00:12:43.360This was going to affect things like Uber.
00:12:45.500Like, there are plenty of seniors who don't drive anymore who now take Uber.
00:12:51.280So it was all of these so-called digital services that the parliamentary budget officer was estimating was going to take in close to a billion dollars a year in Canada.
00:13:02.080Now, who's ultimately going to be stuck with the tab?
00:13:05.820Because the companies sure as heck weren't going to eat this.
00:13:07.980But I wanted to point out, I think this annoyed people too, because it's government getting up in your grill and getting up in your personal life.
00:13:16.400So they wanted to tax you for things like Spotify, for your Amazon purchases, for your Netflix, your time when you're at home and you're trying to unplug from your job and relax.
00:13:38.780It was in the 1600s sometime that the UK had a window tax.
00:13:43.460They would go along and count how many windows were in one building and then tax people for it.
00:13:48.560And of course, the knock-on effect was that the urban poor in cities were getting things like typhus and rickets because they were lacking sunshine because they were getting taxed on their windows.
00:14:00.520Well, people would block them up or cover them up.
00:14:03.160I remember being in Ireland a few years ago and I'm on a tour and our guide is pointing out some of the great stately homes that at one point you can see they used to have windows all over.
00:14:16.360You know, we're talking big country manors, but they had so many windows, the tax would be so high that they boarded them up and they still look like that hundreds of years later.
00:15:10.500So they would figure out or estimate what your revenue within Canada is and then tax that at 3%.
00:15:17.540And while this is going on, by the way, so this is rescinded for now, but there's a lawsuit from some of these same companies, including Amazon and Netflix, Prime, or sorry, I guess Amazon is Prime, but the streamers are being told by the CRTC that you have to pay a special fee to support local news.
00:15:56.700They believe that, well, this would actually go to the broadcasters, but they're trying to regulate them as if they're broadcasters.
00:16:02.980And when broadcasting started, the government said to the people setting up radio stations and then eventually television stations, look, you're using a public good.
00:16:46.600What do you think Donald Trump's going to say when he finds out about that one?
00:16:50.560There are so many, these are all Trudeau-era problems, Trudeau-era mistakes of trying to regulate every part of online life that the Carney government could easily walk away from.
00:17:07.380But the online side and the regulations, the fees, the taxes that the Trudeau government wanted to impose has been a major irritant for both parties in the United States.
00:17:21.320This would have been handled different if Kamala Harris had won instead of Donald Trump.
00:17:26.360But they would still have been telling us, you do that and you're going to have trade problems with us.
00:18:08.340For folks who don't know Hamish Marshall, who's a friend of the program, of course, he's very good at analyzing data down to like the ground level riding, like granular level.
00:19:30.840You got to hope for the best and hope he can fix things like he's promising.
00:19:35.000But, you know, I don't think that that means the bottom's falling out for Pierre Polyev and the conservatives.
00:19:42.140Speaking of which, it is now official.
00:19:43.600There is going to be a by-election in Alberta in Battle River Crowfoot on August 18th.
00:19:48.360So the Prime Minister did keep his promise and called it very soon.
00:19:52.260You'll be able to see that from your compound there in Saskatchewan because there's nothing in between you.
00:19:56.560Well, I'll be heading out to Calgary soon for Stampede and hope to see a lot of good conservatives out there and get a sense of what's going on in Alberta.
00:20:16.860Make sure that you have a great time with your friends and loved ones tomorrow on Canada Day if you're able to take some time out of your busy work schedule.