Prime Minister Mark Carney’s born-again Liberals may have thought they’d erased Justin Trudeau from their history, but, in what is likely a preview of more to come, his ghost still haunts and humiliates them.
The chains the Liberals forged during Trudeau’s life at the nation’s helm were rattled on Friday when U.S. President Donald Trump called a halt to trade negotiations, saying he had “just been informed” about his northern neighbour imposing an “egregious” digital services tax (DST).
The legislation enabling its 3 percent charge on Big Tech companies’ Canadian revenues was, in fact, passed, foolishly, more than a year ago—although, as it turned out, there was no need for quibbling.
Carney dutifully caved to Trump when the going got rough, and the DST and the $2 billion that was supposed to go with it (deposits were due Monday) were gone before the sun set on the weekend. At the time of writing, it was unclear exactly what lever in the machinery of government had been pulled in order to put the brakes on, but legislation rescinding the bill is promised. Elbows down, in other words.
First, a little context. Canada had been working for several years with other OECD countries on a joint approach to taxing web giants (Google, Amazon, Meta, and the like) that are earning more than $20 million in Canada. The process has been ponderous, but when concluded, is expected to apply as of 2022. For reasons known only to Trudeau and his inner circle, Canada lost patience last year and went rogue with its own, equally retroactive, tax.
Business leaders, including both the American and Canadian chambers of commerce, begged Trudeau not to do it. The administration of President Joe Biden made it clear it disapproved, and the then-U.S. ambassador to Canada, David Cohen, said his country was “open to using all available tools that could result in meaningful progress toward addressing unilateral, discriminatory” taxes such as the DST.
Just as the money came due, Trump was called into action by Big Tech, and now the tax is dead. Trudeau’s imposition of it was just plain stupid, and the hope is that Carney had probably known for some time that the foppery would have to be offered up as a burnt offering in negotiations, which are now back on course. It is humiliating for the prime minister and the country to have to kowtow to Trump in this fashion, but there’s plenty more to come on that front.
