Globe editorial: Canada can’t tackle Big Tech on its own – The Globe and Mail

Earlier this month, countries that are party to a global deal on corporate taxation decided to delay implementing new rules by one year, to 2025. The agreement will overhaul decades-old rules on how to tax multinational digital giants such as Amazon and Google, who tend to book profit in low-tax jurisdictions to reduce their bills. New rules would see governments agree to tax the companies based on their share of sales in each country.

Of the 143 countries in the deal, 138 endorsed the latest agreement. Five did not. They were Sri Lanka, Pakistan, Russia, Belarus and Canada.

Ottawa instead will go it alone and start rolling out new tax rules in 2024.

The United States, in defence of the tech companies nominally based there, said it is considering retaliation against Canada. The U.S. could introduce new tariffs to punish Canadian industry.

Such a trade dispute is pointless. One year of tax revenue is not worth being so offside with our major global partners.

The Liberal government is right to push back on giant global technology corporations. But doing so unilaterally is both naive and ineffective for a medium-size country like Canada. Ottawa must move in concert with allies and could learn some things from their approaches.

When the Liberals came to office, they loved Big Tech. Justin Trudeau even attended the unveiling of Googles ill-fated Sidewalk Labs experiment in Toronto in 2017. But as the zeitgeist turned against Big Tech, the Liberals turned with it.

The Liberals began to introduce a raft of bills to modernize Canadas approach to the tech giants. Among them was the once-derided, but totally sensible, Netflix tax, aka a sales tax on digital services; changes to corporate taxation, as discussed above; reforms to privacy law to address how tech giants hoovered up and monetized Canadians personal information; a law to bring streaming services under Canadian content rules; and a bill to force Google and Facebook to negotiate with news publishers to share ad revenue.

The latter two seek to force tech companies to compensate Canadian media for disrupting their business models.

On the news bill, Google and Facebook have reacted as they warned they would: by beginning to block news content and, in effect, pulling out of Canadian news. They can do so because Canada is not a big enough market for them to sweat over. The companies made a deal with Australia after much discussion but they also successfully blocked Spanish news for years over a similar law, until Spain amended it.

The Liberals may score political points for looking tough. But at a steep cost to Canadian industry. This isnt to say the Liberals should do nothing. They should. One place to start is to strengthen Canadian competition and data privacy laws, as this space has argued before.

The real problem with the tech giants is the enormous market power they have amassed globally. Google handles more than 90 per cent of search queries in Canada, and search is one of the most critical pieces of infrastructure in the digital economy. It uses this dominance to make billions of dollars through online advertising, a field it grew to dominate by buying up rivals.

It is this market power that other jurisdictions have aimed at. The United States and the European Union are taking legal action against Google to break up its advertising business on competition grounds.

In Canada, by contrast, Facebook paid a $9-million penalty to the Competition Bureau in 2020 for allegedly mishandling Canadians personal information. The penalty is so paltry for a company of Facebooks size that one imagines the fine was paid off through loose change found in an office couch.

Canada should make sure competition and privacy laws are as robust as those of other countries, so it has the tools to join in a concerted global push to regulate the tech giants.

It can also lean on diplomacy: as tech entrepreneur Jim Balsillie has argued, Canada played a role in promoting financial stability after the 2008 financial crisis why could it not play a role in the global stability of the digital economy? Indeed, Canadas diplomacy leans heavily on multilateral institutions, underscoring the reality that smaller countries need to pool their influence.

In concert with allies, Canada can and should help regulate global tech behemoths. But not if it keeps picking fights it cant win.

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Globe editorial: Canada can't tackle Big Tech on its own - The Globe and Mail