Canadians to Be Refunded After Digital Services Tax Rescinded

When the Digital Services Tax is officially rescinded, Canadians are reportedly going to get refunds.

When US President, Donald Trump, said that he was going to implement tariffs on other nations, there was a big subset of Americans that believed Trump when he said that it is other nations who pay for it. The reality, obviously, is that it is American’s who pay the tariffs, not the other nations. After all, it is a tax on imported goods, meaning that it’s going to be either the companies who eat the cost (less likely) or the cost is being passed onto consumers (much more likely).

A number of Canadians looked on with that aspect of the tariff debate in disbelief. Some might ask how Americans can be so dumb as to believe that it’s the other country that pays the tariffs? While some (most?) of that ridicule is justified, I also noticed that a certain number of Canadians (and the Canadian mainstream media) were also busy making comments that were equally stupid.

This revolves around the Digital Services Tax. The talking point that was pushed was that the government was simply “levelling the playing field” and implementing this tax means that it is just the “Big Tech” companies that pay this. This still makes me do a giant facepalm because by saying it’s the platforms that pay the Digital Services Tax is basically an admission that you have no idea how taxes work when it comes to consumer goods.

When a tax is charged for a good or service that is publicly available, very often, that cost is passed onto the consumer. If you want evidence of this, look at a receipt and you’ll likely see something like a GST and PST line which is an additional charge. This is the company passing the cost of that tax onto consumers. This means that it is the consumers that generally pay. The exact same thing would have applied to the Digital Services Tax. An additional cost was going to be passed onto consumers.

Yet, whenever I point this out, some people suggest that I must be mistaken because they were told that its the tech giants that pay. No amount of explaining how taxes work seemed to budge certain individuals on this front. Not only is it basic logic, but this is also how “Big Tech” was interpreting this. Last year, Google pointed this out, saying that they would be passing the cost onto consumers. That I think would be a reasonable step to make from their perspective because it is a standard business practice.

Yet, when the Canadian government said that they would be rescinding the Digital Services Tax in order to restart negotiations with the United States, the reaction from a number of Canadian’s I saw was just as baffling. For some, the reaction was that it was a terrible news story because Carney backed down on something. When I counter that this is actually a good news story for them because it means that they pay less, my response was swiftly responded to with disdain and ridicule as if I was some sort of Big Tech shill and that I didn’t know what I was talking about. I was told that it was “Big Tech” that would’ve paid and that Canadians would benefit from this in the form of additional revenues flowing into government coffers. No amount of explaining how things work in the real world would get them to change their mind because if the media said that this is the way it is, then it must be true. There really was no way to get through to these numbskulls.

Recently, Google announced that in response to the move to rescind the Digital Services Tax, Google would stop charging consumers for the Digital Services Tax. What’s more, the Canada Revenue Agency (CRA) said that it would be refunding Canadians charged under the Digital Services Tax. From the Globe and Mail:

Google GOOG-Q has stopped charging a fee it put in place last year to cover the cost of Canada’s now-cancelled digital services tax, saying it will issue refunds to advertisers who were charged under the law.

The U.S. tech giant made the announcement Friday, after previously declining to comment on its plans to pause or cancel the 2.5-per-cent surcharge that it put in place in October, 2024, in anticipation of having to pay the levy.

“We are no longer charging a DST Fee on ads served in Canada and will refund any previously collected fees once the legislation has been officially repealed,” spokesperson Shay Purdy said in a written statement.

In another story, there was this note:

The Canada Revenue Agency says it has collected some proceeds from the digital services tax, but will issued refunds after legislation is passed.

This is the real world in action. It was Canadians all along that would’ve paid for this. I don’t know how obvious it could possibly get that this is how things really worked. Yet, despite all of this, even the Globe and Mail pushed the talking point that it was the companies that paid for this:

Collectively, the 3-per-cent DST, which was retroactive to 2022, would have cost U.S. companies such as Amazon.com Inc., Google parent Alphabet Inc., Airbnb Inc., Meta Platforms Inc. and Uber Technologies Inc. about US$2-billion. It applied to their revenues collected via online marketplaces, social-media platforms, the sale and licensing of user data, and online ads.

This is the Globe and Mail misleading readers – a very common practice for mainstream media these days. It’s ultimately Canadians paying for this because those costs are ultimately being passed onto consumers at the end of the day. People who read that will conclude that it’s the platforms paying for this, not the consumer, when the reality is that it is actually the other way around. This in the same story that showed a move that ultimately debunks this myth. I’m personally mystified as to how the media still continues to push this myth even though the issue is effectively dead in the water.

At any rate, I’ll continue to re-iterate the fact that the Canadian government rescinding the Digital Services Tax is a good news story. Canadians are already cash strapped in an economy that is constantly being needlessly threatened by a maniac in the White House. Jobs are being lost due to a drop in trade activity in various sectors and the last thing you need to do in this scenario is make life even more unaffordable to those same people getting hit hard.

It was the dumbest set of circumstances that led to this positive outcome. Canada, under Trudeau, pushed this Digital Services Tax in an environment where Canadians were still financially recovering from the lockdowns of the COVID-19 pandemic. It was a bad policy from the get go that pissed off the Americans even before Trump came into office. Trump decided that the best policy to implement is to hurt all of their allies by slapping on tariffs for everything. One way Trump decided to harm Canada was to refuse to conduct trade talks until the Digital Services Tax was rescinded. Prime Minister Carney, elected on the promise of pushing back against the US, decided that retreat on this front was in order, pissing off his supporters in the process for reasons that actually benefit his supporters. The level of stupidity was so pronounced, that it somehow inverted into something intelligent and forced the Canadian government to make a smart move. It’s kind of astonishing in a way. I’m not going to complain about it, mind you, but the accidental smart move on Canada’s part is ridiculous.

At any rate, other platforms are waiting for the Digital Services Tax to be officially rescinded which probably won’t happen until the government sits down in another session of parliament. So, it’ll be a little while before the government gets a chance to do this, but unless the Canadian government somehow does a massive 180 on this (and I don’t see why they would want to do this here), then chances are, the days of the Digital Services Tax are thankfully numbered.

(Via @MGeist)

Drew Wilson on Mastodon, Twitter and Facebook.