Opinion

Taxing digital monopolies should be 2019 election issue

Taxing digital monopolies should be 2019 election issue
By John AndersonOpinion

It has been a few weeks of important news for all those who believe in fair taxation and that the giant digital monopolies, such as Google, Facebook, Netflix, Amazon and Spotify, should pay their fair share.

First of all, the Quebec government, which is the first in Canada to make the digital oligopolies collect sales tax (only Quebec PST in this case) discovered that in the short period from Jan. 1 to March 31 some $15.5 million was collected from these companies combined, much more than anticipated. Saskatchewan has also started collecting PST sales tax in January on digital sales.

Facebook now claims it too will begin to collect sales tax on ads sold in Canada by the middle of this year. At this rate, if sales tax had been collected across Canada some $90 million in one quarter, or roughly $360 million might have been collected in (GST and PST) sales tax alone in one year. And this is without these companies generally paying any income tax, which could mean even more revenue at the regular income tax rates.

As well, last week, the auditor general looked at the question and “found that the Canadian sales tax system did not keep pace with the rapidly evolving digital marketplace.”

It went on to estimate that the losses were even higher there had been “losses of $169 million in the GST on foreign digital products and services sold in Canada in 2017.” And here again, this is without many digital companies paying any income tax.

This lack of taxation weighs unfairly on Canadian based companies who must collect sales tax and pay income tax, because the rational for this difference according to Canadian tax law is that if your company does not have a physical presence in Canada (as many digital monopolies do not have) it does not have to collect tax or pay income tax.

But even more important, the huge loss of revenues mean we do not have the full choice of the government spending on health, education and social programs that we could do if we had all the tax revenues, which we never receive.

Canada is far behind the e-commerce changes, which now means, for example, that 72 per cent of internet ads show up on Facebook and Google and Canadian media has a shrinking percentage of ads. We have to change the way we tax e-commerce and do it right now.

At the same time, the debate around the regulation of the digital monopolies has become part of the debate in the race for who will become the Democratic Party candidate in the U.S.

Sen. Elizabeth Warren said in March thatthese companies have grown larger and more powerful, they have used their resources and control over the way we use the internet to squash small businesses and innovation, and substitute their own financial interests for the broader interests of the American people.”

And thus it was necessary, “To restore the balance of power in our democracy, to promote competition, and to ensure that the next generation of technology innovation is as vibrant as the last, it’s time to break up our biggest tech companies, ”value="252"/>One of the co-founders of Facebook, Mark Hughes, wrote also recently in an op-ed in the New York Times calling for the breakup of Facebook, Instagram and WhatsApp, all controlled by Facebook and Mark Zuckerberg. We are a nation with a tradition of reining in monopolies, no matter how well intentioned the leaders of these companies may be.”

Antitrust policy is a long-time part of American public policy while in Canada our policy has often tended to strengthen Canadian monopolies rather than break them up.

But we have in the past also believed in the need for strong government regulation and even government ownership in some sectors as we used to do, and struggle to do today, in, for example, the telephone industry, electricity, broadcasting, banking and transportation.

So why not absolutely first bring in the regulation of prices, taxation and services among the digital monopolies, and if necessary public and Canadian ownership changes?

John Anderson has written for the Canadian Centre for Policy Alternatives on this area. He has been the policy director of the Official Opposition and the Canadian Co-operative Association, a senior policy analyst at the National Council of Welfare, as well as research director at the Canadian Council on Social Development.