Fintech, cross-border companies to feel the impact of such a levy
Finance Minister Bill Morneau said Canada recognizes the potential disruption major technology companies represent, and will study whether a new tax regime is required for the industry.
Observers have noted that digital taxation might impact early adopters like the fintech segment, as well as cross-border companies such as Amazon.com Inc., Google parent Alphabet Inc., and Neftlix Inc.
The issue was discussed at the latest Group of 20 meeting in Buenos Aires as the European Union is considering a levy on online companies.
“We are looking at it carefully because we need to understand what if anything happens to our tax base based on a changing of the economy towards a different business model,” Morneau said in an interview with Bloomberg. “[We are] studying the issue with an intent to have a point of view.”
Under the European Union proposal, the tax would focus on where tech users are based, rather than where a company chooses to place its European headquarters. “We’re addressing issues like how the international community is going to think about digital taxation,” Morneau stated.
“We are not studying the issue as an exercise but one that recognizes this presents real differences to how people might be organizing their business over time and where they might be getting profits versus where they might be generating value,” the finance minister added.
Read more: Can technology make syndicated mortgages safe again?
Last July, Royal Bank of Canada CEO David McKay stressed the need for the financial sector to incorporate state-of-the-art technology into all aspects of its process so that it can survive and thrive in the Information Age.
One of the approaches that the bank will be trying is organizing a crack team of 30 PhDs that will be given 3 years to “fundamentally disrupt the way we do banking,” he stated. The group would be working separately from the bank’s mortgage and credit card departments, in a set-up that the CEO said would encourage truly significant steps forward as innovations would be developed “in remote labs away from the strong core of ecosystem.”
“They can be free to innovate and tackle longer timeline challenges without the pressure of quarterly results,” McKay explained. “It is mission-critical. The way we used to work is just not sustainable. The world is changing.”
