Canada is introducing a new tax on digital services, targeting tech giants such as Apple and Google with tax burdens on income they earn within Canada, which has so far not been taxed.
This approach follows in the footsteps of many European states, such as France, Italy and the United Kingdom, designed specifically to combat tax evasion.
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Apple previously operated a corporate strategy that allowed it to pay little or no sales tax in many of the countries it operated in. For example, in European countries, operating was as follows:
Apple Inc. in the US licensed Apple Ireland to manufacture and sell the iPhone in Europe. Apple Ireland then distributed the iPhone to its European subsidiaries, such as Apple France and Apple Italy, charging them almost full retail price. This practice resulted in no profits for Apple stores in Europe, thus avoiding corporate taxes. The accumulated profits were channeled to Ireland, where a favorable tax treaty allowed the company to pay minimal taxes. Apple gradually abandoned this practice in Europe after the disclosure and widespread backlash. However, concerns remain about how digital revenue is calculated and taxed.
In 2020, France introduced a groundbreaking “digital services tax” (DST), imposing a flat 3% tax on the revenues of the GAFA companies: Google, Apple, Facebook and Amazon. This move aimed to recover tax revenues lost due to tax evasion strategies adopted in the sales of digital products.
For Apple, this means providing apps and subscription services like iCloud, Apple Music, and Apple TV+, among others.
Many European countries, including Italy and the United Kingdom, have chosen to follow this example.
A lasting solution to the issue is expected to be achieved through a global agreement, where the largest companies would pay taxes in all the countries where they operate. Tim Cook, CEO of Apple, strongly supports this initiative.
Read more: Davos: The rich demand a tax on their wealth
An initial agreement has been reached by the 137 OECD member countries on the issue, however, progress in the negotiations remains limited due to differences over determining the appropriate minimum tax rate. The United States stands out, proposing a lower rate than most other countries, likely because of the greater impact it would have on American companies.
Source: 9to5mac
