Canada Reverses Course on Digital Service Tax Policy

According to a recent announcement from Canada’s finance ministry,the country has decided to eliminate its digital services tax in an effort to facilitate trade discussions with the United States. This decision comes shortly after former President Donald Trump halted negotiations due to disagreements over tariffs.

The Guardian highlights that Canadian Prime Minister Mark Carney and Trump are set to restart their trade talks, aiming for a resolution by July 21, as stated in a ministry release on June 29.

For months, both nations had been working towards a trade agreement; though, discussions hit a snag on June 27 when Trump accused Canada of unfairly taxing American tech firms—a move he described as “a direct and blatant attack on our country.”

Trump reiterated his stance over the weekend, promising new tariff rates on Canadian imports within the upcoming week.

This digital services tax was initially proposed back in 2020 and would have imposed a 3% levy on revenue generated by companies from Canadian users exceeding $20 million annually. Payments were set to be retroactive starting from 2022. The first round of payments was due by June 30 and could have cost U.S. tech giants like Alphabet, Amazon, and Meta around $3 billion.

Carney emphasized that Canada’s government will always prioritize agreements that benefit local workers and businesses while expressing hope that this decision would pave the way for renewed negotiations.