Tag: tax policy

Elbows Down for Mark Carney on the Digital Services Tax

A late-night, long-weekend post from the GC Newsroom X account indicates that the Government of Canada is backing down on the Digital Services Tax, following an explicit threat from U.S. President Donald Trump.

The US President threatened to immediately cease all trade negotiations with Canada until the tax issue was resolved.

During this year’s general election, Carney famously adopted an “Elbows Up” approach to Donald Trump, reassuring Canadian boomers that he would defend national sovereignty and stand up for Canadian interests.

For his part, Trump mused that Canada would be better off as America’s “51st state” and breathed life into the Liberal Party, instilling just enough fear in Canadians to buy into Carney’s promise to stand up to Trump.

But the election is over – and now Carney appears to have rolled over on a core Liberal policy.

The Digital Services Tax would have imposed a 3% levy on revenue from digital services like online advertising, social media, and user data sales by large tech companies.

It was originally set to be retroactive to 2022, with the first payments due on June 30, 2025. The tax targeted firms like Amazon, Google, and Meta, and U.S. companies faced an estimated $2-3 billion bill.

Both Donald Trump and former President Joe Biden have opposed the DST, viewing it as discriminatory against American firms.

On June 27th, this came to a head with Trump announcing the immediate termination of all U.S.-Canada trade talks, calling the DST a “direct and blatant attack” on the U.S. He threatened new tariffs within seven days, citing Canada’s refusal to pause the tax.

Earlier this month, Canadian Foreign Minister Francois Phillipe Champagne promised that the DST would go through as planned.

Rick Tachuk, President of the American Chamber of Commerce in Canada advocated for a pause of the Digital Services Tax in an op-ed published just five days ago.

The Liberals promised to introduce the tax during the 2019 general election and the Parliamentary Budget Officer had projected it could raise $7 Billion from US companies over 5 years. Its implementation had been delayed to bring others – in particular the EU – onside.

Canada has faced renewed pressure from its primary trading partner since re-electing Donald Trump as President in 2024. Trump argues he’s simply correcting a trade imbalance between the U.S. and Canada. His trade policy has had significant effect on key Canadian industries such as steel, aluminum, and auto manufacturing.

Meanwhile Canadian Prime Minister Mark Carney – elbows up or not – is finding that Canadians are starting to question his ability to handle the pressure – given how quickly this collapse has come.

Harper: GST from 7% to 5%

harper-gst-cut.jpgA Conservative government under the leadership of Stephen Harper will reduce the GST from 7% to 6% immediately and then to 5% within five years.

This announcement generates a mixed reaction from me, but it’s mostly good.

First of all, small ‘c’ conservatives argue that we should be moving away from income taxes and towards consumption tax as taxing savings and wealth generation discourages investment. However, lowering consumption taxes encourages consumerism which will certainly stimulate the economy from everyday items such as newspapers to big-ticket items such as cars and homes.

While the latest announcement isn’t necessarily reflective of Mr. Harper’s masters degree in economics, he should be awarded a doctorate in politics. Today’s announcement will certainly get voters excited and has the added benefit of dragging the Liberals through the inevitable ‘but some critics say’ angle from the MSM. You see, some critics say that voters don’t trust politicians on GST promises, but then again, we’re talking about Liberals specifically. Remember the broken promise about eliminating the GST in the Red Book? Sheila Copps resigned over that Liberal broken promise.

“I’ve already said personally and very directly that if the GST is not abolished, I’ll resign. I don’t know how clear you can get. I think you’ve got to be accountable…and you have to deliver on it” — Sheila Copps, Globe and Mail, March 11, 1996

So, Stephen Harper gets to make a wildly popular announcement while skeptics can only cite a flaw by pointing out one of the biggest Liberal flip-flops in Canadian history.

Policy wise, is this a good move overall in the eyes of small ‘c’ conservatives? Well, the net reduction of taxes is a conservative ideal, so the reduction of the GST is a victory for small ‘c’ conservatives and the taxpayer. Will we move to a consumption based tax system in the future, eliminating income tax entirely? Perhaps that’s well off into the future, but for the present a 2% reduction in the GST will win the Conservative Party a lot of support.

Canadian Taxpayer’s Federation National Director John Williamson agrees,

“The idea of reducing the GST is just as valid as any other tax-reduction proposal we have seen to date. I think it is one that will prove to be popular with a lot of voters.” — John Williamson

Paul Martin had this to say about the GST in 1989:

“Mr. Speaker, the goods and services tax is a stupid, inept and incompetent tax.” — Paul Martin, November 28th 1989

And today, Mr. Martin had this to say:

“I don’t believe that is the path to follow … Canadians have been down this road before. They’ve heard this story.” — Paul Martin

Didn’t Paul Martin author the Liberal’s broken GST promise in the Red Book?

On the leadership campaign trail

All three candidates vying for the leadership of the new Conservative Party of Canada are now in the heart of their respective campaigns. As Tony Clement, Belinda Stronach and Stephen Harper criss-cross the country, signing up new members and impressing current ones, here is a comparison of their campaigns.

On the Liberal sponsorship scandal
As we’re all aware, the latest scandal has hit the Liberal Party and it has hit it hard. Dr. Hill, Leader of the Opposition, has been trying to crack this one wide open. The next leader of the Conservative Party of Canada will have to be effective in pointing out Liberal lies so how do Stephen Harper, Tony Clement and Belinda Stronach approach this issue?

“Does Paul Martin seriously expect us to believe that he is a stranger in the Liberal Party? He was not only Minister of Finance during the Sponsorship scandal, but he served as the senior minister for Quebec in the last election. He sat on the cabinet’s Quebec Committee with Alfonso Gagliano – a man whom Martin has just fired. I demand to know the reason he was fired.” — Stephen Harper

“The only way to clear the air is for the Liberal Party to return the money it received from communications companies involved in this scandal … In addition, The Chief Electoral Officer should investigate all other Liberal Party financing to ensure that no taxpayer dollars ended up in Liberal Party coffers” — Belinda Stronach

Quebec
Some say the battle will be won and lost in this province of many ridings and few members. Indeed, if either candidate is to win Quebec and thus win the race, membership sales will be key.

Belinda Stronach is on her way to winning the province as she has received endorsements from 42 Riding Association Presidents and from 5 former MPs. There are 75 ridings in Quebec and Belinda Stronach has done well to capture the votes there.

Stephen Harper, it seems, is not doing as well in Quebec. He sent out an email requesting that his supporters, “Help [him] sell memberships in the province of Quebec” and “call your friends or relatives in Quebec and get their information to fill out the (membership) form and sign them up for the new party”. This seems to stand in stark contrast with Belinda Stronach’s organizational efforts in Quebec as she has most of the Tory organizers working/volunteering for her there.

So, Stronach and Harper are making varying degrees of progress in Quebec, yet Tony Clement hasn’t made too much noise there. If it is any indication of Tony’s success in Quebec, he is the only leadership candidate without a goofy photo with the Quebec city Carnival’s Bonhomme de Neige. While Stronach and Harper are sweeping through Quebec, Tony has decided to go to Saskatchewan.

harperbonhomme.jpg
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Policy
Where Tony Clement has turned some heads, however, has been on a “radical” (according to the Toronto Star no less) tax reform policy. This leadership candidate for the Conservative Party of Canada has proposed that the first $250,000 of earnings by every Canadian should be tax free.

“This is about giving young people an opportunity to start their lives here in Canada … A lot are immersed in student debt, they’re looking for an opportunity to make a start in life and here’s a chance if you stay in Canada, the first $250,000 you make is tax free.” — Tony Clement

On tax policy, Belinda Stronach has not been shy. She has pledged to make mortgage interest partially tax deductible and to allow parents to deduct their children’s post-secondary tuition from their income taxes. She has also promised to repeal the tax on capital investment.

Stephen Harper, meanwhile, continues to espouse lower corporate taxes instead of corporate handouts. However, Mr. Harper also proposes to eliminate subsidies given to the Maritimes by the Atlantic Canada Opportunities Agency. This position is sure to be controversial in the East.

Conclusion
All three leadership campaigns seem to have their advantages and disadvantages. However, a definite advantage must be recognized in the campaigns of Belinda Stronach and Stephen Harper over that of Tony Clement. The race is still wide open, however, as the upcoming all-candidates debate on the 22nd could provide some surprises and will likely provide momentum to the candidates that do well.