In The Weekly Wrap, Sean Speer, our editor-at-large, analyses for Hub subscribers the big stories shaping politics, policy, and the economy in the week that was.
The Digital Services Tax is not worth all this trouble
In light of Donald Trump’s social media announcement that he’s ending trade negotiations with Canada over the federal government’s stubborn insistence on its Digital Services Tax (DST), we must remember that the DST isn’t just bad because it has provoked the president and threatened our trading relationship with the United States. It’s bad policy on its own terms.
Before the prime ministership of Justin Trudeau, successive Canadian governments had a hands-off internet policy. The results have been extraordinary. It has led to an explosion of content, democratized whose stories and what stories are told, lowered the barrier to entry for Canadian entrepreneurs and small businesses, and generated tremendous innovation that’s improved education, health care, and other parts of Canadian society.
This four-decades-long experiment with an open internet has been a major policy success—in fact, I’d argue that the Chretien government’s initial decision in favour of a de-regulated internet may be the most enlightened in more than 30 years.
Yet the Trudeau and now Carney governments have adopted the completely opposite view. They assume that these technology companies are exploitative and harmful. That the internet is anarchistic and dangerous. That the state must coordinate, manage, and shape what Canadians buy, make, see, and sell online.
They’re not satisfied, in other words, with micromanaging the physical economy. They insist on now doing the same to the online economy.
The DST must therefore be understood as part of a broader suite of policies—including the Online Streaming Act and the Online News Act—designed to re-regulate the internet. These laws and policies represent an unprecedented expansion of state power to a hitherto unregulated part of the economy.
The consequences are predictable. Although the DST is slated to generate less than $1 billion in annual revenues, the true costs will be far greater. The government’s policies will mean less freedom and choice on the internet. Entrepreneurs and content creators will find it harder to sell their products online. Consumers’ preferences will be subordinated to the diktats of the government. And the tax burden will invariably be passed on to all of us.
Now we know that DST may even undermine our ability to secure a trade agreement with the U.S. It’s one thing to give up tariff-free access to the American market in the name of protecting our interests or principles. It’s another to throw it away for manifestly bad policy.
The Carney government should abandon its internet regulation agenda, including the DST, because, first and foremost, it is bad for Canadians. That it is bad for Canada-U.S. relations and the future of a bilateral trade agreement is only a secondary reason.
