Highlights:
- Canada has halted the implementation of its Digital Services Tax (DST) just hours before it was set to take effect.
- The move is aimed at reviving trade talks with the U.S., which had stalled after objections from former President Donald Trump.
- The DST targeted U.S. tech giants such as Amazon, Meta, and Google, potentially costing them $3 billion.
- Canadian officials say the preference remains a multilateral solution to taxing digital services.
- Both nations aim to finalize a new trade agreement by July 21.
Tax Suspended Hours Before Rollout
In a last-minute decision, Canada suspended its planned Digital Services Tax (DST) just hours before it was to take effect, aiming to repair trade relations with the United States. The tax would have levied a 3% fee on digital revenues earned from Canadian users by large multinational tech firms, including Amazon, Google, Meta, and Apple.
The move followed days of tension after former U.S. President Donald Trump abruptly halted trade talks, calling the tax a “direct and blatant attack” on American companies. The tax was expected to cost U.S. firms an estimated $3 billion and had drawn fierce opposition from U.S. officials.
Trade Talks to Resume Ahead of July Deadline
Canada’s finance ministry confirmed on Sunday that it would halt DST collection and introduce legislation to fully repeal the tax. The goal is to restart negotiations and finalize a new economic agreement by July 21. Prime Minister Mark Carney and President Trump had met earlier this month at the G7 summit and agreed on a 30-day timeline to strike a deal.
“Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress,” said Finance Minister François-Philippe Champagne.
U.S. Welcomes Move, Tariff Threat Still Looms
U.S. Commerce Secretary Howard Lutnick welcomed Canada’s decision, writing on X, “Thank you Canada for removing your Digital Services Tax… it would have been a deal breaker.”
However, tensions are not entirely eased. Trump reaffirmed his readiness to impose new tariffs on Canadian goods within the week if talks falter, threatening a return to the trade turbulence that marked his first term.
Canada Still Favors Global Solution
The Canadian government emphasized that the DST was always a temporary measure. “Canada’s preference has always been a multilateral agreement related to digital services taxation,” the finance ministry stated.
Canada remains the second-largest U.S. trading partner and its biggest export market. In 2023, bilateral trade reached over $760 billion, underscoring the high stakes of the ongoing negotiations.
Also in the news:
Harvard and University of Toronto make contingency plan for international students
Looking to Advance Your Career?
Boost your professional journey with Prepsaret! Whether you’re pursuing PMP, CompTIA, or HR certifications, Prepsaret is your go-to study companion.
Unlock top-quality resources, practice exams, and expert support designed to help you succeed on test day and move your career to the next level!