Thank you, Chair. Good morning, again.
Part 2 of the bill would enact the digital services tax act.
Canada prefers a multilateral approach to digital taxation and has been involved in discussions at the OECD since 2017. The government announced the digital services tax, or DST, in November 2020 as an interim measure pending a common approach. In October 2021, countries without DSTs, such as Canada, agreed not to impose new DSTs during the negotiations until the end of 2023. Countries with DSTs before 2022, such as France, the United Kingdom and Italy, continued to collect their DSTs.
The government announced in 2021 that if a multilateral treaty were not in force by the end of 2023, the DST would be imposed for 2024. Today, negotiations to finalize a treaty continue. Therefore, the government is proposing this legislation. It was released in draft in December 2021, and again in August 2023, so businesses have known what to expect.
The DST is a 3% annual tax on revenue from certain digital services. It would apply to large firms with global revenue of at least €750 million, and digital services revenue linked to Canadian users of at least $20 million.
The tax would focus on digital services in which data and content from Canadian users are a key input and value driver, specifically, online marketplaces, online targeted advertising and social media. It would apply equally to Canadian and foreign-owned businesses.
It would come into effect on a day set by order in council on or after January 1, 2024. As announced in 2021, the first year would cover revenues back to January 1, 2022. Meanwhile, the government continues to engage with our international partners.
Thank you.