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Canada announces plan to tax foreign digital giants from 2022

Canada plans to add further tax requirements for companies providing online products and services under a new "fair tax system for the digital economy," Finance Minister Chrystia Freeland said on Monday.

The changes will include charging large foreign-based companies Goods and Services Tax/Harmonized Sales Tax (GST/HST), which they currently do not have to pay.

The federal government plans to implement a digital tax directly on corporations providing digital services, which will take effect on January 1, 2022. It could boost federal revenue by 3.4 billion Canadian dollars (2.6 billion US dollars) over five years, Freeland said in a Fall economic update.

The current system "puts the burden on Canadian consumers to remit the sales tax," Freeland said. "[It] gives foreign-based digital corporations an unfair advantage, and undercuts the competitiveness of Canadian companies."

The new tax is expected to hit companies including Google's parent company Alphabet, Apple as well as streaming services such as Spotify and Netflix.

Digital marketplaces, which include app stores, will have to pay GST/HST from July 2021 under the new proposal.

This measure is expected to bring in 1.2 billion Canadian dollars in five years.

The economic statement outlined other major financial policies intended to steer the country through economic downturn amid the coronavirus pandemic, including a short-term stimulus package valued at 70 billion to 100 billion Canadian dollars over roughly three years.

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