GUNTER: Canada looks weak to U.S. by backpedalling on digital services tax
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There are so many things wrong about the Liberals’ climbdown from the digital services tax (DST) announced late last Sunday evening.
For one, they look like they played chicken with U.S. President Donald Trump and lost. They swerved first.
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That makes them (and the whole country) look weak. Trump will now be back again and again with new demands because he knows he can threaten to cut off trade talks or jack up tariffs and our tough-guy, elbows-up prime minister will fold.
Next it is likely to be supply-managed agriculture, mostly in dairy, poultry and eggs, which Trump has railed against since his first term in office. (It would be good to be rid of supply management, but that’s another discussion.)
The Liberal government looked foolish and dishonest.
On the evening of June 29, when Finance Minister François-Philippe Champagne announced the government was cancelling the DST on billions of dollars of goods and services sold online, he insisted the Liberals had been contemplating cancelling the tax all along.
That is such a lie. There’s no gentler way to put it.
Hundreds of large Canadian and foreign providers of online goods and services had already filed DST returns and paid tens of millions of dollars in new taxes.
The deadline for initial DST payments was June 30. And companies had had to comb back through their books to 2022 to calculate how much they owed.
This is as much a foul-up on the Liberals’ part as their colossally messed-up attempt to raise the capital gains tax by nearly one-third in 2024. On that occasion, companies and professionals spent millions (perhaps as much as a quarter-billion dollars) paying accountants’ fees to realize capital gains in their businesses and retirement plans prior to the June 25, 2024, deadline for the tax to go up.
But the Liberals never passed the tax increase. It was never put in place. Canadians wasted hundreds of millions of their own money trying to comply with the Liberals’ wishes.
Pulling the plug on the DST last week was similar. Hundreds of companies and their accounts toiled for weeks to get their first DST returns and initial payments ready. Many had already paid.
Yet when Champagne announced the tax’s demise, he didn’t also announce when the paying companies could expect full refunds. He hinted there would be further details on how to apply for their money back, but the Liberals already know who paid and how.
Refunds should be as straightforward as the government putting the money back where it came from.
With interest.
If you are late paying your taxes, the Canada Revenue Agency will charge you interest. You might even be liable for penalties. Stiff ones.
But the reverse isn’t true, even though it should be.
Businesses that complied with the DST, that obeyed the rules (even though they may have disagreed with the tax), should not only get their money back — pronto — but should be compensated with interest for the time their money was in Ottawa’s grubby hands.
In short, going back on the DST at the last second, under pressure from the bully Trump, makes Canada — and specifically Prime Minister Mark Carney — look feeble.
But it was the right thing to do.
It would have been far better if the Liberals had never introduced the DST. It was one of those fashionable, punitive, anti-business taxes that global “progressives” think is justified to rob from the “rich” to give to … well, mostly to give to the internationalist “progressives,” their governments and pet causes.
Not only were the Liberals justified in getting rid of the DST to restart trade talks with the Trump White House, they were smart to get rid of it to preserve Canadian production by online streaming services and sellers, too.
It was a good thing. But the Liberals have to stop stepping in cowflops of their own making.
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