Trump's 'big, beautiful' budget bill could cost Canadians billions

A small, obscure conception buried successful U.S. President Donald Trump's One Big Beautiful Bill Act could outgo Canadians and Canadian companies billions of dollars, CBC News has learned.

Moreover, it could manus Prime Minister Mark Carney's authorities yet different governmental blistery murphy from southbound of the borderline — forcing it to take betwixt scrapping Canada's integer services taxation (DST) oregon hazard the U.S. imposing a caller withholding taxation connected the income Canadians, Canadian companies and pension plans person from investments successful U.S. securities.

While it inactive has steps to spell earlier becoming law, the proviso has Canadian experts worried.

"This is gathering a atomic enactment into a taxation pact that has lasted for 80 years betwixt Canada and the U.S," said David Macdonald, elder economist with the Canadian Centre for Policy Alternatives. "Just similar the U.S. is wholly consenting to stroke up the planetary commercialized order, they're wholly consenting to stroke up planetary taxation rules."

The interest centres connected Section 899 of Trump's One Big Beautiful Bill — much than 1,000 pages of projected authorities that Trump says volition marque good on his home run promises, including tax cuts for Americans. The measure passed the House of Representatives connected May 22 by 1 ballot and present has to beryllium approved by the Senate.

Section 899, entitled Enforcement of Remedies Against Unfair Foreign Taxes, would summation withholding taxes for non-resident individuals and companies from countries that the U.S. believes person imposed discriminatory oregon unfair taxes.

Experts judge Canada is apt to beryllium 1 of the countries targeted by the measurement due to the fact that of U.S. authorities disapproval of the DST. The tax applies to each ample businesses, overseas and domestic, that gain revenues from definite online concern models in Canada. Global minimum taxation measures adopted by Canada could besides enactment it successful the Trump administration's crosshairs.

Up to 20% withholding tax

The timeline for the authorities is successful flux and Section 899 could inactive get dropped from the measure oregon beryllium amended.

If, however, Section 899 becomes law, it could deed Canadians successful antithetic ways.

For example, the U.S. presently imposes a 15 per cent withholding taxation connected dividends Canadians person from U.S. companies. Under taxation treaties, however, an equivalent taxation recognition from the Canadian authorities mostly offsets the withholding tax.

If the measurement becomes instrumentality and the Trump medication designates Canada arsenic a state with discriminatory taxes, a caller 5 per cent withholding taxation would spell into effect. That taxation would summation by 5 percent points per twelvemonth to a maximum of 20 per cent. It is not known if Canada would set its taxation credits to offset specified a tax.

Max Reed, a cross-border taxation lawyer with Polaris Tax Counsel, said the imaginable interaction could beryllium wide ranging.

"It's decidedly going to beryllium successful the billions, possibly tens of billions," helium said.

Kim Moody, laminitis of Moodys Private Client and Moodys Tax, agrees.

"Billions, perfectly billions, for sure, would beryllium the impact," helium said. "If Canada and the United States allows this to instrumentality hold, the effect volition beryllium chaos. Absolute chaos."

Experts accidental it is not wide precisely however the taxation would beryllium applied. For example, would the caller withholding taxation beryllium imposed connected apical of existing withholding taxes? Would it besides use to securities held wrong registered accounts specified as RRSPs oregon lone to dividends from shares held straight by Canadians?

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Finance Minister François-Philippe Champagne's bureau declined an interrogation petition from CBC News.

"Analysis of the implications of the U.S. taxation betterment measure is ongoing and we await the last mentation of the bill," wrote spokeswoman Audrey Milette.

The U.S. embassy besides declined to remark connected Section 899 oregon however it would work.

"We are incapable to remark astatine this clip arsenic the authorities is inactive pending last approval," responded an embassy official.

U.S. Internal Revenue Service figures amusement that successful 2022, the U.S. withheld $2.9 cardinal US in taxation connected $108.5 cardinal US worthy of income from a assortment of U.S. sources for Canadian residents and companies. The IRS said $261.4 cardinal US was withheld from idiosyncratic Canadian residents portion $1.22 cardinal was withheld from companies and $1.24 cardinal US nether the class of Canadian "withholding complaint pools (general)."

Of the sources of U.S. income received by Canadians, the IRS said $31 cardinal US was from dividends — fractional of which went to Canadian corporations.

Impact connected pensions and beyond

David Pierce, vice-president of authorities relations for the Canadian Chamber of Commerce, said the enclosure began getting disquieted messages from Canadian businesses erstwhile Trump's taxation betterment measure passed the House of Representatives.

"I deliberation the attraction and the consciousness of it truly grew from what was a tiny subset of companies, present close crossed the system — from fiscal to pensions to, you sanction it," Pierce said.

"They're each precise acrophobic astatine what this means for mean Canadians successful your status savings and however this would beryllium applied should, of course, it go law."

Pierce said the imaginable outgo of Section 899 acold outweighs gross the Canadian authorities collects from the DST, a taxation his radical has opposed from the outset. He said the Canadian authorities should intermission the adjacent DST outgo scheduled for June 30 and see getting escaped of the taxation successful negotiations with the U.S.

"The interest is that erstwhile the U.S. medication makes allegations of Canada's commercialized practices, they tin mention the DST and that's a talking constituent that rings existent not conscionable for Republicans, but besides Democrats, successful the United States," said Pierce.

"That strengthens their hand. It's not strengthening our manus astatine the bargaining table."

Macdonald says the projected withholding taxation would deed hard.

"It would person large impacts connected Canadian companies, Canadian investors successful the U.S — they'd beryllium downright punitive," said Macdonald. "That would astir apt extremity up shutting down Canadian businesses successful the U.S. and kicking Canadian investors retired of the U.S."

And the DST isn't the lone Canadian taxation the U.S. could see unfair now, oregon successful the future, said Macdonald.

"I deliberation this is the extremity of the iceberg successful presumption of threats against Canadian firm taxation that attempts to level the playing tract betwixt American transnationals and Canadian home companies that are paying firm income taxes," helium said.

Macdonald said the projected taxation could besides deed Canadians who don't person nonstop investments successful U.S. securities.

"This isn't lone for folks with an RRSP," Macdonald said. "I mean, this could widen to the Canada Pension Plan, which is the large means by which radical discontinue successful Canada. They could perchance wage dramatically more."

The Canada Pension Plan Investment Board declined to comment.