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My European Favourites – Tallinn, Estonia
Tallinn is one of those cities that you never hear people talk about visiting, but once you do, it becomes an instant favourite. Whenever we do an itinerary for a hockey, ringette or sightseeing group to Sweden and Finland, I always encourage the group to add a side trip to Estonia’s capital. It is only a two hour ferry ride from Helsinki to Tallinn, so it’s perfect for a day trip.
Tallinn has just under half a million inhabitants and is the largest city of Estonia. It is located directly south of Helsinki on the Gulf of Finland and on the eastern edge of the Baltic Sea. Once known by its German name, Raval, Tallinn has one of the best preserved old towns in Europe. Unlike many towns in Europe, Tallinn’s historic old town was never destroyed by war and is listed as a UNESCO World Heritage Site. I like to think of it as a smaller Prague. The city started building protective walls in the 13th century, and over time, it enlarged to a defence system of over two kilometers with gates and towers. Much of these structures survive today including twenty of the pointy red roofed towers. In some areas, it is possible to walk along the walls.
Near the old town you will find traditional neighborhoods with colorful wooden houses, green spaces and the redeveloped bustling port area. Estonians are blessed with public beaches to enjoy in the summer months and nearby forests to explore on nature walks. Within view of the old town, there is a modern city, complete with skyscrapers and all the modern amenities you would expect. How modern is Tallinn? It has free public WIFI, and as a high-tech city, it has become a leader in the sector of cyber security. You may have used the services of a well-known Estonian startup company named Skype.
About Estonia
There is evidence that the area was settled as far back as 5,000 years ago, but the city became an important trading hub in the 14th to 16th centuries when it was a member of the Hanseatic League, which controlled trade in the Baltic and North Seas. Even at that time, the city only had about 8,000 inhabitants.
Over the years, Estonia has been ruled by the Holy Roman Empire, Denmark, Sweden and Russia. The country gained short lived independence from Russia after WWI only to be reclaimed as part of the Soviet Union after WWII. Like most of the countries that became part of the USSR, they suffered through a fifty year period of communist policies and stagnation. In 1991, after the dissolution of the Soviet Union, Estonia regained its independence. Since then it has flourished into a western style city while maintaining its rich cultural and architectural history. It is a member of the European Union and NATO.
Tallinn’s distinctive mix of a modern and historic skyline as we arrive on the ferry from Helsinki.
Ferry to Tallinn
Tallinn is a two-hour ferry ride south from Helsinki, and it’s possible to go early in the morning across the Gulf of Finland and return late on the evening ferry. The Tallink ferry has sitting areas on different decks plus shopping and dining options onboard. If possible, I would recommend an overnight stay near the old town and return to Helsinki the following evening.
From Sweden, you can arrive on the overnight ferry that leaves Stockholm in the early evening and arrives in Tallinn in the morning. Your individual ticket includes a cabin that can sleep up to four people with two single beds and two pull down upper berths. Onboard, you can enjoy shopping, entertainment, bars and restaurants. Another option from Stockholm is to take the ferry to Riga and spend a couple of days in Latvia’s capital. The drive from Riga to Tallin is about four hours, and I usually like to stop along the way in the seaside resort city of Parnu to have lunch and walk in the city centre.
A Tale of Two Towns
Tallinn’s historic center is separated into two areas, Toompea, and Vanalinn. At one time, they were two feuding medieval towns. The upper town, Toompea, includes the aptly named Toompea Castle. The lower town, Vanalinn, has narrow alleyways, the town square, shops and restaurants. Vanalinn, was the Hanseatic League trading center filled with merchants from Germany, Denmark and Sweden. The two areas are connected by two passages called the short leg (Lühike Jalg) and the long leg (Pikk jalg).
Toompea, Tallinn’s Upper Town
As expected, the Toompea Castle sits high above the lower town on an ancient stronghold site that dates back to a wooden fortress in the 9th century. The castle, a symbol of political power through the ages, has been expanded and remodeled over the years by Estonia’s rulers to meet their needs.
Once a castle of ancient Estonians starting in the 11th century, it was later used by the Danish during most of the 13th century. It wasn’t until the 14th and 15th centuries, while in the hands of the Holy Roman Empire’s Teutonic Order, that it was built to resemble what we see today. The religious order changed the castle interior to include a chapel, chapel house, convent and dormitories for the knights. They added defence towers named Pikk Hermann (Tall Hermann), Landskrone (Crown of the land), Pilsticker (Arrow Sharpener) and Stür den Kerl (Ward Off Enemy) to protect each of its four corners. During the 16th century when Estonia became a part of Sweden, they changed the castle from a crusader’s fortress to a symbol of political power, with an administrative and ceremonial purpose.
Tall Hermann, entrance to the Governors Garden and the Toompea Castle’s pink palace.
When the Russians took over in the 18th century, the Czar had the castle turned into a palace by adding a Baroque and Neoclassical wing to the eastern part of the castle and a public park on the south east. When Estonia declared its first independence from Russia after WWI, the former convent of the Teutonic Order was transferred into an assembly hall for the Parliament of Estonia, named the Riigikogu. After being disbanded during the Soviet era from 1940 to 1991, the assembly, the Riigikogu, was reinstated in 1992 as the Estonian Parliament with 101 members.
I like to start my tour of Tallinn in the upper town just outside of the Toompea Castle, so I can get a good look at the impressive Tall Herman and original castle wall from the Governors Garden. During the castle’s evolution, the Stür den Kerl castle tower has been demolished while the others have been integrated into building projects. The 48 meter high Tall Hermann still stands and has become an important symbol of Tallinn and the nation. The Estonian flag is raised atop the tower every day at sunrise as the national anthem plays and it is lowered at sunset.
Around the corner from the park is the Lossi Plats (Castle Square) where we can see the pink palace which was added to the front of Toompea Castle during the renovations by Russian Czars. Topped by the Estonian flag, the one-time medieval fortress is now clearly the modern centre of government for Estonia. On the opposite side of the square is a richly decorated Russian orthodox cathedral.
The Castle Square, the Alexander Nevsky Cathedral and an Russian Orthodox mosaic.
Alexander Nevsky Cathedral
The striking Alexander Nevsky Cathedral was built in 1900 in Russian Revival style when Estonia was part of the Russian Empire. It is Tallinn’s largest orthodox cupola cathedral and is dedicated to Saint Alexander Nevsky, a Russian military hero, who in 1242, won a famous “Battle of the Ice” against the Teutonic Knights on Lake Peipus. The lake on Estonia’s eastern border is shared with Russia with the modern day border between the countries being about half way across.
During the USSR period, the church came into decline due to communist non-religious policies. Since 1991, the church has been meticulously restored even though it is a constant reminder of Russia’s influence, power and oppression over Estonia through the ages. There were actually plans to demolish the structure in 1924, but it was spared due to a lack of funds to raze such a large building. Today, the church is one of Tallinn’s most visited attractions and is unique due to its contrasting architectural style.
The church exterior has five onion domes, each topped with a gilded Orthodox cross. The church has eleven bells that were cast in St. Petersburg, including one massive 16 ton bell.
Like other traditional Orthodox churches, there are no pews as worshippers were required to stand during services. The ornate interior has three alters, stained glass windows and three gilded wooden iconostases (wall of icons and religious paintings) which separate the nave from the alters. Entrance to the cathedral is free. The intricate detail and colors of the mosaics and icons are amazing and well worth seeing.
St. Mary’s Church, the top of the baroque tower spire with the year 1772.
Leaving the Castle Square, we venture further into the upper town, and about 100 meters in, we reach the Kiriku Plats (Church Square) and a white medieval church with a baroque bell tower. The Toomkrik built by the Danes in the 13th century, also known as the Dome Chrurch or St. Mary’s Cathedral, is Estonia’s oldest church. Originally a Roman Catholic cathedral, it became Lutheran in the mid 16th century and is the seat of Tallinn’s Archbishop of the Estonian Evangelical Lutheran Church. Although the church endured severe damage in the great fire of 1684, it was the only building on Toompea left standing. It was restored to its previous state shortly after the fire and a new baroque spire was added in the 18th century.
From the Church Square, we can see the light green colored Estonian Knighthood House. This is the 4th Knighthood house that was built for noble Knights to meet and enjoy festivities. The Knighthood was formed in 1584 by the Baltic German nobles, but it was disbanded in 1920. Currently, the building is used by the Estonian Academy of Arts. On the right of the building we take the Kohtu street until we reach the end and turn right onto a small open area between two buildings.
Kohtuotsa views: Towards the harbour and of the old town with skyscrapers in the distance.
A Panoramic View and Sweet Almonds
As we enter the Kohtuotsa viewing platform, which is a courtyard between two buildings, the smell of candied almonds overwhelms the senses. A wooden kiosk with a couple of girls dressed in traditional costume are making batches of sweet almonds in a copper pot. They have a sample for you to try, and when you do, the sale is complete. They have two options, Magus Mandel (Candied) or Soolane Mandel (Salty). I have the candied ones every time.
There is a stone wall at the end of the platform with amazing panoramic views of Tallinn. Looking to the left, you can see the white tower of St. Olaf’s Church amongst medieval towers with the harbour and the sea in the distance. Directly ahead are the roof tops and spires of the lower town with the skycrapers of the city in the distance. It’s quite a contrast of architecture from medieval structures to modern steel and glass.
Another nearby viewing platform is the Patkuli, which is reached by climbing 157 steps from the old town up to Toompea. This platform offers a great view of the harbour area.
Leaving the Kohtuotsa, we go back towards the Nevsky Cathedral and take the Long Leg Street down into the lower town. We walk along the fortification walls until we reach the Long Leg Tower and enter the lower town.
Walking down the Long Leg passage to the Long Leg Tower and into the lower town.
Vanalinn – Tallinn’s Lower Town
Emerging from the Long Leg Tower, we continue on Pikk street until we reach the Grand Guild Square (Suurgildi Plats). The square is named after the medieval gold colored Great Guild Hall that is now the Estonian History Museum. The Great Guild was a medieval association of merchants, artisans, and craftsmen in Tallinn from the 14th century until 1920. On the square, we also find the Lutheran Holy Spirit Church (Pühavaimu kirik). The white washed medieval church has stained glass gothic windows, an octagonal bell tower and an interesting 17th century carved clock on the façade. If you enter the church, you will see elaborate wood working, especially on the alter.
The Maiasmokk Café, the Holy Spirit Church, the church clock and the pharmacy sign.
Established in 1864, the Maiasmokk Café on the square, is the oldest in Tallinn. The café interior hasn’t changed for over a century. It is famous for its marzipan, which is said to have been originated in Tallinn. Marzipan is made from almond meal and either sugar or honey. The café’s Marzipan Room details the city’s history of making marzipan including traditional marzipan figures made from special molds.
If we take a small passage along the church, we will reach the Town Hall Square (Raekoja Plats). As we enter the square, two doors down on our left is the Town Hall Pharmacy (Revali Raeapteek). This pharmacy dates back to 1422, and it may be the world’s oldest pharmacy in continuous use.The pharmacy has a museum where you can see some of the old time medicines and potions. You can test various herbal tea blends picked from local fields in the basement of the Town Hall Pharmacy (or Raeapteek) or explore the exposition of the 17th to the 20th-century medicine in the back room. You can purchase some of the products from the middle ages including teas, spices, chocolate, marzipan and claret, a potent libation made from wine and spices that dates back to 1467.
The Old Town Square’s colorful buildings, the Town Hall and a Town Hall dragon water spout.
The lively Town Hall Square, one of the best preserved medieval town squares in the world, was a market place in the Middle ages. Many of the colorful buildings on the square were once medieval merchants’ homes, offices and warehouses from the Hanseatic Golden Age. During the summer months, the restaurants around the square set up their umbrellaed patios where you can enjoy lunch and a cool beverage as you watch locals and tourists mill about. Restaurants like “III Draakon” and ‘Olde Hansa” offer a unique medieval experience with menu items made with elk, bear and boar meat.
The square is the centre of the Old Town Days medieval festival, concerts, fairs and the centuries old Christmas market. It is said that in 1441, the Brotherhood of the Blackbeards, a professional association of merchants, ship owners and foreigners, erected the very first Christmas tree here on the square. Today, in addition to the tree, the Christmas market fills the square with kiosks selling everything from gingerbread to knitted mittens and handicrafts. Other kiosks sell snacks, oysters and mulled wine to keep you warm. Kids can drop off letters at the Santa Claus cabin and ride the carousels in a magical setting. On a stage, hundreds of performers take turns entertaining the crowds during the markets month long stay from the 27th of November to the 27th of December.
Sweet Almond vendor and Old Town buildings. The Christmas market stage and a kiosk.
The town hall, built in 1404, sits prominently on the square and is the oldest in the Baltic and Scandinavian regions. It is no longer in the seat of the municipal government but is used for special events and ceremonies, and is the home of the Tallinn City Musuem. The town hall tower can be climbed in the summer months to get another great view of Tallinn. Since 1530, a weather vane of Vana Toomas, or Old Thomas, has been keeping lookout atop the spire. Old Thomas, who is holding a sword and an arrow, is said to be a protector of Tallinn.
The square is spectacular, but it can be touristy. I like to wander through the cobblestone streets and alleyways surrounding the centre to find restaurants and cafes where the locals frequent. Walking these side streets is like taking a time machine back to the medieval ages, but you will find interesting little museums, galleries and shops selling local products like amber.
St. Catherine’s Passage kiosks and alley. The Viru Gate tower and the white Viru Hotel.
St. Catherine’s Passage, the Viru Gate and the KGB
From the Old Town square if we go to the right of the old town and down the busy pedestrian Viru Street we will reach the St. Catherine’s passage on Müürivahe Street. The passage leads to the St. Catherine’s Monastery which was founded in 1246 by the Monks of the Dominican Order. The monastery is the oldest building in Tallinn. At the monastery, you can visit the chapel, gallery, or book a private tour. The medieval passage itself, formerly known as Monk’s alley, has the tall fortification wall on one side with little kiosks below selling handicrafts and 15th to 17th century residences on the other side, with some now being used as artists workshops.
Only steps away from the St. Catherine’s passage is the 14th century Viru Gate that was part of Tallinn’s wall defences. When the entrances to the Old Town were widened in the late 1800’s, many of the gates were destroyed. The Viru Gate’s corner towers survived and are a great divide from the medieval town on one side and the modern city on the other.
During the 50 year Soviet occupation of Estonia, the KGB had its headquarters in the old town at Pagari 1. In its basement, suspected enemies of the state were imprisoned, interrogated and tortured. If convicted of crimes, they were either shot or sent to labour camps in Siberia. The tall white Viru Hotel that can be seen clearly in the distance from the Viru Gate has a KGB Museum. Like any hotel where foreigners stayed, the hotel had to have spying facilities for the KGB. The museum tells the story of their activities and the Soviet mindset.
St. Olaf’s Church, the Fat Margaret Tower, and the Kadriorg Palace.
St. Olaf’s Church
On the northern edge of the old town is Tallinn’s biggest medieval building, the iconic St Olaf’s Church. Named after the sainted Norwegian king Olav II Haraldsson, the church was the tallest building in the world from between 1549 and 1625 due to its 124 meter tower. The church had three great fires in 1625, 1820 and in 1931 caused by lightning striking its tall spire. In fact, lightning has struck the church at least 10 times. During the Soviet occupation, the spire was used as a radio tower and KGB surveillance point. Today, if you climb 232 steps on a winding staircase you will have a great view of the city and the harbour area. I’m not sure I would go on an overcast day tough.
Near the church is the Fat Margaret tower which houses a part of the Maritime Museum. The main part of the museum is the Seaplane Harbour (Lennusadam) which is located a couple of kilometers away. It is one of Europe’s biggest maritime museums with a submarine, icebreaker, seaplane, an aquarium, simulators and other activities.
Other Things to do in Tallinn
If you go to the wall connecting the Nunna, Sauna and Kuldjala towers, you can walk the city walls, like the medieval guards that protected the town.
Near the old town, the Rotermann quarter has been transformed from old warehouses and factory buildings into a trendy and lively neighborhood with modern architecture.
Kumu Art Museum, with a modern architectural design, depicts various periods of Estonian art from the Academic Style to Modernism, from Soviet Pop Art to contemporary art.
Near the Alexander Nevsky Cathedral, Tallinn’s Museum of Occupations tells the history of the country’s occupation by the Nazis during WWII and then the Soviets.
Patarei Prison is a huge complex in the Kalamaja district that can be visited in the summer months. Once an artillery battery in the 19th century, it became a prison from 1919 to 2002.
The 314 meter high Tallinn TV Tower has a glass-floored viewing platform on the 21st floor with a 360 degree view of the city. Thrill seekers can take a safety harnessed walk on the open deck.
Foodies may want to visit the Kalev Chocolate factory or the Baltic Station Market.
Just Outside of Tallinn
Just outside Tallinn is Kadriorg Park. Established by Peter the Great in 1718, it has the Kadriorg Palace as well as beautiful gardens and woods. The park includes a concert area, children’s park, a people’s park and a Japanese garden.
The 72 hectare Estonian Open-Air Museum has around 80 reconstructed buildings from the 18th to 20th centuries. The traditional structures were brought here from throughout Estonia.
Tallinn is not overly priced, or especially crowded with tourists. You can easily spend a few days in Tallinn, and it is well worth adding to any itinerary of Sweden or Finland. You will thank me for it.
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A tax expert on the departed Digital Services Tax, and the fiscal and policy holes it leaves behind
It’s fun, and fair, arguing whether Mark Carney “caved” in suspending the application of Canada’s Digital Services Tax to revive broader negotiations with the Trump administration. But I figure there are other dimensions to this issue besides tactics. So I got in touch with Allison Christians, a tax law professor at McGill University and the founding director of the Canadian Centre for Tax Policy.
In our talk, Christians discusses the policy landscape that led to the introduction of the DST; the pressure that contributed to its demise; and the ways other countries are addressing a central contradiction of the modern policy landscape: without some kind of digital tax, countries risk having to impose costs on their own digital industry that the overwhelmingly US-based multinationals can avoid.
I spoke to Christians on Friday. Her remarks are edited for length and clarity.
Paul Wells: I noticed in your social media that you express inordinate fondness for tax law.
Allison Christians: You will not find a more passionate adherent to the tax cult than me. Yes, I do. I love tax law. Of course I do. How could you not? How could you not love tax law?
PW: What’s to love about tax law?
Christians: Well, tax law is how we create our country. That’s how we build our society. That’s how we create the communities that we want to live in and the lifestyle that we want to share with our neighbours. That’s how: with tax law.
PW: I guess the goal [of tax policy] is to generate the largest amount of revenue with the smallest amount of grief? And to send social signals while you’re at it. Is that right?
Christians: I don’t think so. Tax is not about raising maximum revenue. Tax is about deciding what society you’re trying to build and what portions of that society need to be made public, and what can be left to private interests which then need to profit. So we have decided in Canada, as a country, that basic minimum healthcare cannot be a for-profit enterprise. It has to be a public enterprise in order to make sure that it works for everybody to a certain basic level. So tax is about making those decisions: are we going to privatize everything and everyone pays for their own health care, security, roads, insurance, fire department etc. And if they can’t pay, then too bad? Or are we going to have a certain minimum, and that minimum is going to be provided in a public way that harmonizes across the communities that we have. And that’s what tax is about. It’s not about extracting revenue at all. It’s about creating revenue. It’s about creating a market. It’s about investing in a community. So I just object to the whole idea that tax is about extracting something from me, because what tax is doing is creating a market for me to be able to thrive. Not just me, but all of my neighbours, as well.
PW: Let’s jump forward to the events of the past couple weeks. Were you surprised when the Prime Minister suspended the Digital Services Tax?
Christians: I think “surprise” is probably too strong of a word, because nothing any political leader does to cope with the volatility of the United States would surprise me. We are dealing with a major threat, a threat that is threatening to annex us, to take our resources, to take our sovereignty, to take our communities and rip them apart and turn them into a different way of being. And that’s a serious threat. So nothing would surprise me in response to that. Disappointed, of course. But not disappointed in our Canadian response. More disappointed in the juggernaut that Trump has been allowed to become by his base, and that they’re pulling the rug out from under everyone that’s cooperated with the US agenda for decades, including us.
PW: What’s your best understanding of what the Digital Services Tax was designed to accomplish? And is it unusual as taxes go?
Christians: So to understand this, you really have to be a policy wonk, which isn’t much fun. So I’m gonna give you an example that might make it clear from the perspective of Canada. Why we might have a Digital Service Tax or might want something like it.
I want to preface this by saying that the Digital Service Tax is by no means the only way to do the underlying things we want to accomplish. Certainly other countries have been collecting DSTs and have been collecting billions of dollars, and US companies have had reserves for paying that Digital Service Tax. So we just left money on the table. But let me try to explain why we want to do the thing without getting too “tax nerdy” on you.
So I’m sure you can come up with the one Canadian company that’s streaming content on television or on digital devices.
PW: Crave?
Christians: Yeah, that’s the one. Crave is owned by Bell Media and is a Canadian company. And Crave pays taxes in Canada. Crave has to compete against Netflix, which does not have to pay tax in Canada. Netflix just simply doesn’t have to pay the same way that Crave does unless we force them to pay. Crave has to compete with US and foreign content streamers. We may get to a point where we can get Netflix to collect some sales tax on the GST, for example. But if Netflix itself stays out of Canada, physically, but it’s still getting all those customers that otherwise Crave would have access to, then Crave is at a structural disadvantage.
Now tell me which Canadian provider competes with Google.
PW: I can’t think of one.
Christians: Exactly. There isn’t one. How are we supposed to get a homegrown competitor when our competition simply does not pay taxes, and any one we would grow here in Canada has to pay tax here? So we have to understand the Digital Service Tax as simply our response to the fact that we normally do not tax a company unless they are physically located in Canada. But now we’ve got to go into this digital space and say: you’re still here, even if we can’t see you and talk to you, you’re still here. You’re doing something in our market. And that’s what the Digital Service Tax was trying to deal with.
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PW: Now, how are companies likely to respond to this Digital Services Tax? It seems to me the likeliest outcome would be that they would pass those costs on to their customers.
Christians: Yes, that is what companies have said they would do. Google talked about passing those costs on to the customers. And their customers obviously are advertisers. I want to point out that advertisers in Canada used to advertise in local newspapers and media. Now they advertise on Facebook, owned by an American-headquartered Company, Meta. Right now, they advertise on those foreign platforms, so we don’t have those advertising dollars here. Advertisers might have had to pay the Digital Service Tax if Google, or whoever, had passed it on to them. I think it’s fair to say, that Canadians advertising on those foreign platforms would have faced a gross-up to cover that tax.
PW: So, the net effect is that it just becomes more expensive for Canadian consumers. I’ve seen it argued that all this tax would have succeeded in doing is making Netflix more expensive.
Christians: Okay, that’s possible. I mean, that assumes the supply is totally elastic: you can increase the price of Netflix, and people will still pay it indefinitely. Right? So that’s the assumption in the short term. But the long-term assumption is that Crave becomes more competitive — because its competitors are paying the same tax that it is paying. The Crave subscription price may or may not respond, but if you put pressure on the foreign service providers in the same manner that’s on the Canadian providers, it might cost more, but we’re also getting the tax.
PW: I believe the Prime Minister, in an interview with the CBC said that he was thinking of getting rid of this thing, anyway. [The quote I’m reaching for here is: “Look, what we did this week is something that I think we were going to do anyways, in the end, for the deal.” At 1:07 in this video. — pw] Why do you think he would have been leaning in that direction? And do you think that absent a Truth Social post by President Trump, he actually would have gotten rid of the thing?
Christians: I can’t speculate too much about the politics of this, because I’m not talking to many of the people that make policy, but I know the complaints about the DST, and I don’t dispute them. It was going to be a complicated tax to collect and it was going to be messy in terms of compliance. There’s a lot of uncertainty around the tax and I know there’s always an enormous amount of pressure to reduce all taxes. There’s always going to be that segment of society that sees taxes being thrown down the drain and not as an investment in the society that we want to live in.
American companies are famous for investing their money on lobbying and not in taxes. They spend their money convincing us that it would be bad for us to tax them, and they can spend a much smaller percentage of their money on lobbying and get us to believe that narrative. And the narrative is that somehow, if we tax Google, Google will go away and we won’t be able to use it. That Google won’t innovate. It’s nonsense, but it’s a story that resonates nonetheless. Was Prime Minister Carney pressured to get rid of the DST? Undoubtedly. And maybe he personally thinks there’s a better way to tax these companies than with an excise tax. I don’t fault him for thinking that. I have even written that there are better ways for Canada to collect this tax than the Digital Services Tax.
PW: I’m going to want you to tell me about these other ways. But I assume that if a Canadian government attempts any of these other ways, then the companies we’re talking about know that all they have to do is hit the Trump button and the pressure will be right back on.
Christians: That’s correct. There are a couple of [alternatives to the DST]. We could, like some other countries have done, redefine the types of income that we subject to withholding taxes in Canada. It’s a complicated technical idea, but basically any payments that go from our advertisers to Google, we could impose a withholding tax simply by expanding a couple of definitions in the Income Tax Act that would then carry over into our treaty. Now, people will push back on that, and say that you’re changing a deal, and people will object to that. And we can have an argument about that, but that possibility exists. That withholding tax is the most straightforward way to do this and we should probably already be thinking about it.
Another one that’s kind of fun, which I really enjoyed learning about when I came to Canada, is Section 19 in the Income Tax Act. So, Canadian advertisers are paying Google now, instead of a Canadian newspaper. Well, Section 19 basically says that whenever someone makes a payment for advertising to a foreign, non-Canadian media, that payment’s not deductible.
Now that provision seems to violate Free Trade rules because it changes, depending on who you make the payment to. But it’s a provision in law. The US objected to it when we adopted it by imposing a reciprocal tax on US advertisers paying Canadian outlets, which doesn’t seem to bother anybody.
PW: But the application of that will be very asymmetrical, right?
Christians: Yes, for sure. And I’ll tell you what the Canadian media noticed when we started paying for digital newspapers online: that they’re not subject to Section 19 — only print and traditional media are subject to this denial of deduction — and Canadian media advocated for this denial of deduction for online publications as well.
All you have to do is look at the wording of Section 19 — and you don’t even have to change the words — and all of a sudden all those payments to Google are not deductible. But if the payments were to Crave, they would be deductible, and if they are to the Globe and Mail, or other Canadian companies, they would be deductible. That is a different kind of advantage for the Canadian competitor that’s a little less susceptible to Trump’s understanding, and a little less susceptible to the politics that surround the Digital Services Tax. But it’s technical. You have to explain it to people, and they don’t believe you. It’s hard to understand it.
PW: Theoretically a two-time central-bank governor could wrap his head around it.
Christians: Yes, I think he could fully understand it, for sure. You’re absolutely right. Will he want to do it, though? I just don’t know.
PW: You said that there are other jurisdictions that continue, today, to successfully tax the web giants. Who are you thinking of?
Christians: Well, Austria’s been doing the Digital Service Tax since the beginning. The UK has the Diverted Profits Tax that they’ve been using. Australia has one that’s been enforced. Austria stands out because I think it was 2017, in Trump’s 1st term, and it was part of a group that Trump threatened to retaliate against, but they just quietly kept going and they’re still collecting it. Part of the narrative is that we, Canada, came too late to the DST party. We just weren’t part of that initial negotiation. We came in too late, and then it was too obvious, and people were able to isolate us from the pack.
PW: My understanding is we’re looking at a hypothetical $7.2 billion in revenue over 5 years. And that represents a shortfall that’s going to have to be found either in other revenue sources or in spending cuts, or in greater debt. Aside from the DST, do you think Canada could use a general overhaul of its tax code?
Christians: Always. Yes, absolutely! Taxes are funny, right? Because they come into every single political battle, and what ends up happening is that politicians treat the Tax Act and the tax system as a present-giving machinery, and not as a clear policy deliverance system.
I am, every day, surprised at how complicated the Canadian tax system is. It’s way too complicated. You can’t even fill out your own tax return in this country. You’re going to make mistakes because it’s just too ridiculously written. It’s too confusing. It’s too messy. So it’s time to take another look. But you need a commission [like the 1962 Carter royal commission on taxation]. You need to be bipartisan. You need to spend money on that. You need to think that the things that you do have long-term effects, and this takes political courage. And basically it requires upsetting a bunch of people and resetting things, and we just might not be at the right time politically to be doing that because people feel vulnerable to volatility from abroad. So it may not be the time to push that.
Invite your friends and earn rewards
From The Center Square
By
After the self-described socialist Zohran Mamdani won the Democratic primary for mayor in New York, Dallas Mayor Eric Johnson invited New Yorkers and others to move to Dallas.
Mamdani has vowed to implement a wide range of tax increases on corporations and property and to “shift the tax burden” to “richer and whiter neighborhoods.”
New York businesses and individuals have already been relocating to states like Texas, which has no corporate or personal income taxes.
Johnson, a Black mayor and former Democrat, switched parties to become a Republican in 2023 after opposing a city council tax hike, The Center Square reported.
“Dear Concerned New York City Resident or Business Owner: Don’t panic,” Johnson said. “Just move to Dallas, where we strongly support our police, value our partners in the business community, embrace free markets, shun excessive regulation, and protect the American Dream!”
Fortune 500 companies and others in recent years continue to relocate their headquarters to Dallas; it’s also home to the new Texas Stock Exchange (TXSE). The TXSE will provide an alternative to the New York Stock Exchange and Nasdaq and there are already more finance professionals in Texas than in New York, TXSE Group Inc. founder and CEO James Lee argues.
From 2020-2023, the Dallas-Fort Worth-Arlington MSA reported the greatest percentage of growth in the country of 34%, The Center Square reported.
Johnson on Thursday continued his invitation to New Yorkers and others living in “socialist” sanctuary cities, saying on social media, “If your city is (or is about to be) a sanctuary for criminals, mayhem, job-killing regulations, and failed socialist experiments, I have a modest invitation for you: MOVE TO DALLAS. You can call us the nation’s first official ‘Sanctuary City from Socialism.’”
“We value free enterprise, law and order, and our first responders. Common sense and the American Dream still reside here. We have all your big-city comforts and conveniences without the suffocating vice grip of government bureaucrats.”
As many Democratic-led cities joined a movement to defund their police departments, Johnson prioritized police funding and supporting law and order.
“Back in the 1800s, people moving to Texas for greater opportunities would etch ‘GTT’ for ‘Gone to Texas’ on their doors moving to the Mexican colony of Tejas,” Johnson continued, referring to Americans who moved to the Mexican colony of Tejas to acquire land grants from the Mexican government.
“If you’re a New Yorker heading to Dallas, maybe try ‘GTD’ to let fellow lovers of law and order know where you’ve gone,” Johnson said.
Modern-day GTT movers, including a large number of New Yorkers, cite high personal income taxes, high property taxes, high costs of living, high crime, and other factors as their reasons for leaving their states and moving to Texas, according to multiple reports over the last few years.
In response to Johnson’s invitation, Gov. Greg Abbott said, “Dallas is the first self-declared “Sanctuary City from Socialism. The State of Texas will provide whatever support is needed to fulfill that mission.”
The governor has already been doing this by signing pro-business bills into law and awarding Texas Enterprise Grants to businesses that relocate or expand operations in Texas, many of which are doing so in the Dallas area.
“Texas truly is the Best State for Business and stands as a model for the nation,” Abbott said. “Freedom is a magnet, and Texas offers entrepreneurs and hardworking Texans the freedom to succeed. When choosing where to relocate or expand their businesses, more innovative industry leaders recognize the competitive advantages found only in Texas. The nation’s leading CEOs continually cite our pro-growth economic policies – with no corporate income tax and no personal income tax – along with our young, skilled, diverse, and growing workforce, easy access to global markets, robust infrastructure, and predictable business-friendly regulations.”
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