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National Post

Colby Cosh: Carney's surrender to Trump was inevitable

One funny thing about the 'elbows up!' slogan of the New Canadian Nationalism is that in real life it's pretty hard to hit yourself with your own elbow. But in the actual policy sphere, most of what we might do to put our elbows up against the United States involves self-harm or, at a minimum, self-denial. Article content On Sunday the Department of Finance issued a terse circular announcing that the Digital Services Tax announced in 2021 would not, as originally planned, begin to be collected on Monday. The DST (R.I.P.) was designed to exclusively target Canadian revenues of American 'web giants' that provide online services, advertising, or streaming content. As the Finance memo observes, it is being dropped at the last minute in the hope of restarting negotiations with the U.S. on an updated version of continental free trade. Article content The idea of a DST was framed by the Trudeau government as a moral necessity of the 21st century: something had to be done about foreign vampires like Netflix and Google which had built businesses with millions of Canadian customers out of digital ether, but paid no tax in Canada. Everybody recognized, however, that much of the cost of the tax was bound to come out of the pockets of the customers rather than the vampires. Article content Article content It's inherently difficult to know how the tax incidence would have worked out, because the process of digital price discovery isn't especially mature: some of these companies are still figuring out their own optimum, revenue-maximizing price points in plain sight. But from a selfish point of view, Canadian consumers, considered strictly as such, can only feel relief at the sudden abandonment of the DST. Article content Is this a craven surrender on the part of the post-Trudeau Liberals? Well, this is the problem with interpreting everything in brute terms of animalistic personal combat, isn't it? The governments of the developed nations largely agree (perhaps against the interests of their own citizens) that there ought to be an international framework for digital-services taxation, and the OECD reached an agreement that nobody would run wild and introduce their own digital taxes until the issue could be sorted out collectively. Article content From that neoliberal-nerd point of view, Canada went rogue when it announced a homebrewed DST — one that would have had a nasty retroactive effect, that was designed specifically only to collect from large American companies with recognizable names, and that didn't address double-taxation issues. And let's recall that Joe Biden was still president when this happened. Article content Article content It's worth noting that this isn't just a question of playing chess against Donald Trump. Canada was really forced to withdraw the DST by the terms of the Trump-designed One Big Beautiful Bill passed by the U.S. House of Representatives in May, and now before the Senate. The OBBB reflects the fact that there's genuine bipartisan distaste in the U.S. toward the digital taxes hypothecated by Canada and already in effect in some other countries; it allows for tax-withholding countermeasures against countries that impose 'unfair' taxes on U.S. digital companies, countermeasures whose size could easily have dwarfed the relatively meagre revenues from the DST. In other words, if the government hadn't pulled the plug on the DST, we might have quickly found out how a one-armed man does in a battle of elbows. Article content