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The U.S. Chamber of Commerce, the Internet Association—which represents Facebook, Google and Amazon, among others— the Entertainment Software Association and other lobby groups said the measure “purposely targets, and would almost exclusively impact” U.S. firms, undermining their participation in the Canadian technology market. The Liberals’ federal election platform included a three per cent value-added tax on sales of online advertising and user data for companies with $1 billion or more in global revenue, of which at least $40 million is made in Canada. (Reuters)

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Talking point: The Liberals’ tax is modelled on one the French government implemented in July, which also provides a template for how a U.S.-Canada dispute could play out. At the time, U.S. President Donald Trump threatened a “substantial reciprocal action,” citing French wine, and his administration launched a trade investigation. But the U.S. backed off after France agreed to reimburse the difference between its tax and the OECD’s final proposal to overhaul the global corporate tax system, due by the end of 2020. The Liberals said their tax, which is supposed to take effect in April 2020, is a temporary measure until the OECD changes are implemented. In Ottawa, both Twitter and Airbnb updated their lobbying registrations this month to include the digital-tax proposal.

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Governments would be able to tax a to-be-determined portion of firms’ worldwide earnings, even if they do not have a physical presence in the country, according to a consultation document released Wednesday. The measures would apply to companies with revenues of more than US$821 million that operate across international borders and have a “sustained and significant involvement in the economy.” The OECD is also proposing a “legally binding” dispute-settlement mechanism to arbitrate between companies and governments. (The Logic)

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Talking point: The proposals are designed to stop governments from creating a fragmented taxation system by imposing country-specific levies on Big Tech, which France has passed and officials in the U.K. and Canada’s Liberal Party are considering. The Trump administration has opposed the French measure, threatening retaliatory tariffs. But the OECD measure is not restricted to the tech giants, most of which are run from California—for example, the U.S. would be able to impose higher taxes on the American sales of luxury brands, some of which are based in France. Those kinds of trade-offs are designed to encourage a quick consensus on the new approach to taxation. The OECD document states it needs agreement on the types of rules countries are willing to set by January 2020 so it can set the specific revenue thresholds and tax levels by the end of 2020.

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The EU “should be willing to act alone” by 2020 even if there’s no global agreement on digital tax reform, said Margrethe Vestager, the commission’s incoming vice-president, who will be in charge of digital policy and competition for the bloc. Paolo Gentiloni, Europe’s commissioner-designate for taxation, said he would try to keep individual EU countries from vetoing such a move. (Reuters)

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Talking point: The warning comes after France became the first EU member to impose a digital levy on foreign digital companies’ revenues. France went ahead with the tax despite threats of retaliation from the U.S., where President Donald Trump argued it unfairly targeted U.S. firms—a sentiment echoed by the heads of Google and Amazon—and threatened to slap a duty on French wine. The two countries have since reached a compromise, and in August, they pledged to take leading roles in an OECD task force that is expected to propose a global framework for taxing companies that generate revenue in a nation without having a physical presence there. In March, European finance ministers scrapped a plan for an EU-wide digital tax following objections from a handful of member states—including Ireland and Scandinavian countries—that preferred to work towards an international consensus. The comments from Vestager and Gentiloni suggest Europe will keep the pressure on the U.S. for an agreement.

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Vestager will also oversee Europe’s digital policy with the new title “executive vice-president, Europe fit for the digital age.” The new commissioner will take office on November 1, pending approval by the European Parliament. (The Logic)

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Talking point: A two-term run is almost unheard of for EU competition commissioners—the only person who has served in this position for a comparable period was Hans von der Groeben, from 1958 to 1967; the position was established at the beginning of his term. Holding onto the position will allow Vestager, who has repeatedly challenged tech giants, to continue spearheading her ongoing investigations, including her probes of Facebook’s Libra digital coin and Amazon’s business practices. Her new role as executive-vice president for digital will also afford her new authority, as she will now be in charge of the commission’s policies on cybersecurity, industrial and big data, as well as Europe’s taxation of tech giants. Bringing competition and data regulation together under one position is unprecedented.

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Non-Canadian companies produced about 16 per cent of total oilsands production this year, as compared to 33 per cent in 2014 and 22 per cent in 2010. (Canadian Press)

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Talking point: Alberta’s oilsands have been bleeding foreign money since the 2014 crash in global oil prices; that’s thanks to a combination of increased taxation and stricter regulation, including a lower methane cap introduced by the federal government in 2018. Mounting legal challenges to new pipelines—like Keystone XL and Enbridge’s expansion of its Line 3 pipeline—have also discouraged foreign investors; U.S. companies alone have divested over US$30 billion dollars in the past three years. But ownership of foreign assets has mostly been transferred to Canadian companies, increasing their footprint in the global market. Earlier in 2019, Oklahoma-based firm Devon sold its Jackfish thermal oilsands project to Calgary-based Canadian Natural Resources for $3.8 billion. That deal made Canadian Natural Resources one of the world’s largest oil firms. And, while foreign capital marches out, Canada’s overall exports of energy products are up. Alberta’s oil capital exodus stands in stark contrast to Canada’s overall foreign direct investment rate, which reached $18.7 billion in the second quarter of 2019—its highest level since the beginning of 2015.

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The company paid its advertising revenues earned in Japan to its branch in Ireland—where the corporate tax rate is 12.5 per cent compared to Japan’s 30 per cent—a violation of Japan’s tax laws. Facebook has since remitted more than 150 million yen (about $1.3 million) in taxes and penalties to rectify the violation, which occurred over two years from 2015 and 2017. Facebook said the company is “cooperating with taxation authorities to comply with legal regulations in each country.” (Japan Times)

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Talking point: Many countries, including Canada, do not require Facebook to collect and remit taxes in the country where digital sales are made. While Japan does require this, its tax authorities have expressed difficulties in keeping the social media company and other tech giants compliant. In January, Japanese tax authorities found that Google failed to declare about US$32 million in income earned in the country in 2015 by transferring it to Singapore. There’s a growing international push to tax digital companies, as well as standardize those taxes so companies can’t park revenues from one country in another that has lower tax rates. The OECD, for example, plans to create a global tax for foreign-based tech companies that all member states, including Ireland, will implement simultaneously. The OECD is aiming to have a draft of the law complete by the end of 2020.