Canada rescinds digital services tax targeting U.S. tech giants to restart stalled trade talks with the Trump administration and avoid further economic fallout.
Canada Repeals Digital Tax to Reopen U.S. Negotiations
In a late Sunday announcement, the federal government confirmed it will withdraw its controversial Digital Services Tax (DST), a move aimed at reviving trade negotiations with the United States. The decision comes just days after U.S. President Donald Trump abruptly suspended all discussions with Canada in response to the tax, which was due to take effect June 30.
Tax Targeted U.S. Tech Giants
The DST, introduced under Prime Minister Mark Carney’s leadership, would have levied a 3% tax on Canadian revenue generated by major digital platforms earning over $1.1 billion globally. Companies like Amazon, Alphabet (Google’s parent company), Meta, Uber, and Airbnb were expected to pay retroactive fees dating back to 2022—amounting to over US$2 billion in total.
Trade Talks Back on the Table
The Carney government stated that talks with the Trump administration will now resume, with both parties aiming to finalize an economic and security agreement by July 21, 2025. The resumption follows a commitment made at the G7 summit in Kananaskis earlier this month, where both leaders agreed to a 30-day window for negotiations.
Trump Calls DST ‘Egregious’ in Fox News Interview
While speaking to Fox News in a pre-recorded interview aired Sunday, President Trump condemned Canada’s DST as “egregious” and reiterated his displeasure with Canada’s supply management system for eggs, dairy, and poultry. However, he indicated that the tax—not the broader trade structure—was the main trigger for halting talks last week.
Economic Implications and Industry Reactions
The Parliamentary Budget Officer had estimated annual DST revenues of $1.2 billion, with federal projections suggesting $2.3 billion in the 2024–25 fiscal year alone. Despite potential fiscal gains, Canadian business groups warned that implementing the tax unilaterally could strain Canada-U.S. economic relations. The Business Council of Canada had repeatedly urged Ottawa to avoid disrupting cross-border commerce.
Global Context: DST Adoption Elsewhere
Canada’s DST was not unique. A 2024 Tax Foundation report noted that at least 18 other countries—including France, India, and the U.K.—have implemented or proposed similar digital levies. However, the U.S. has consistently opposed such taxes, arguing they unfairly target American firms.
Next Steps Toward a Bilateral Agreement
With the DST rescinded, attention now turns to what concessions each side may bring to the table before the July 21 deadline. Analysts say the move opens the door for Canada to negotiate relief from tariffs imposed earlier this year by the Trump administration, offering a potential reset in strained bilateral relations.
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