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Edmonton Journal
18 hours ago
- Business
- Edmonton Journal
Why the digital services tax had to die for the Canada-U.S. trade deal to live
Article content WASHINGTON, D.C. — Ottawa could almost taste the tax revenues. For nearly five years, Canada has been planning a digital services tax (DST) that would generate billions in revenue by taxing large tech firms on their Canadian digital revenues. Just hours before the first DST payments were due on Monday, however, Prime Minister Mark Carney's government called the whole thing off. Article content Carney's move late Sunday was a capitulation to the White House — and he had little choice after President Donald Trump abruptly cancelled trade negotiations on Friday over the DST, calling it 'a direct and blatant attack on our country.' Faced with 25 per cent tariffs on most Canadian exports to the U.S. and 50 per cent tariffs on its steel and aluminum, Canada needed to keep the trade talks alive. So Carney did what had to be done, stating that the move 'will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month's G7 Leaders' Summit in Kananaskis.' What led to the DST, and why did Washington oppose it? The Liberals first introduced the DST in 2020 — a 3 per cent tax on big tech companies with Canadian digital revenues above $20 million per year — as a stopgap, with the real goal of pushing for a multilateral, OECD-led overhaul of the international tax system to curb multinational tax avoidance. Article content Several countries, including France, the United Kingdom, Italy, and Spain, had begun implementing DSTs in 2019 and 2020, raising alarm bells for large U.S. tech firms and advocacy groups. The Computer & Communications Industry Association (CCIA), a U.S.-based trade association representing technology and communications companies, was one that pushed back, calling the DSTs discriminatory. The taxes 'hit U.S. companies but are designed to exempt local companies, putting U.S. firms at a competitive disadvantage in the market,' said Jonathan McHale, VP of digital trade at CCIA. President Joe Biden supported an OECD approach to reforming the international tax system – and its moratorium halting the rollout of unilateral DSTs, adopted by the OECD/G20 Inclusive Framework in late 2021. Canada waited in hopes of there being an international tax reform, but by July 11, 2023, when the OECD agreed to another year-long extension on the moratorium, Prime Minister Justin Trudeau's government decided it had waited long enough. It pushed ahead unilaterally to pass the Digital Services Tax Act last summer, despite warnings from U.S. diplomats and risk experts that it could spark a trade war. Article content While Canada's approach was meant to tax both foreign and domestic firms, McHale said that's simply how countries go about saying they are not formally targeting American companies. He referred to 'disguised techno-trade' and proportionality, noting that 'on the surface, [the DST] looks neutral, but the impact is essentially focused on a particular foreign country.' Canada's DST, he said, would've mostly impacted U.S. tech firms. But there was opposition to it at home, too, he noted, because the tax would have hurt would-be startups trying to establish themselves in the Canadian market. 'There were lots of Canadian companies that were vocal in their opposition to this, the Canadian Chamber of Commerce chief among them,' he said, noting that they didn't want it to upset their strong startup culture and digital economy. Biden's team pushed back last year when the tax was passed, arguing repeatedly for a multilateral solution, and then-U.S. Ambassador to Canada David Cohen labelled it 'discriminatory.' Article content Trump, in turn, had more leverage and threatened the cessation of trade talks and even higher tariffs, but many saw this coming. 'If you don't push back against Canada's [DST], isn't that a green light for other countries to move ahead?' asked McHale. Opposition to DSTs has been a 'longstanding bipartisan issue' in the U.S., he noted. Could dropping the DST lift trade? It can't hurt. Besides, it was necessary to get back to the negotiating table. After Canada rescinded the tax, Trump and Carney agreed to resume trade talks with an eye toward reaching a deal by July 21, 2025. 'Canada's preference has always been a multilateral agreement related to digital services taxation,' Carney's statement said, reminding folks that the DST was only ever meant to be a short-term solution. His government also remains 'engaged in discussions with the U.S. and other countries to find a workable solution on international taxation that achieves our common objectives,' a Department of Finance official told National Post. Article content The Canada Revenue Agency issued a statement on Monday confirming the tax was suspended and noting that reimbursements will be made to companies that already paid 'if legislation is tabled in Parliament and receives royal assent.' The White House, meanwhile, viewed the decision to drop the DST as positive. Trump officials also hope the move will encourage other countries to eliminate similar taxes to avoid U.S. retaliation moving forward. Canada's DST 'would've been the most burdensome tax for U.S. companies — topping the list of revenues extracted from U.S. firms,' McHale said. But DSTs are still in effect in several countries that have strong trade links with the U.S., including the U.K., Spain, and France, and they should expect similar pushback from Washington. 'The U.S. government has been pretty clear that they oppose the policy … so it stands to reason that it would push back against these others as well,' McHale added. Article content Latest National Stories
Calgary Herald
18 hours ago
- Business
- Calgary Herald
Why the digital services tax had to die for the Canada-U.S. trade deal to live
WASHINGTON, D.C. — Ottawa could almost taste the tax revenues. Article content For nearly five years, Canada has been planning a digital services tax (DST) that would generate billions in revenue by taxing large tech firms on their Canadian digital revenues. Just hours before the first DST payments were due on Monday, however, Prime Minister Mark Carney's government called the whole thing off. Article content Article content Article content Carney's move late Sunday was a capitulation to the White House — and he had little choice after President Donald Trump abruptly cancelled trade negotiations on Friday over the DST, calling it 'a direct and blatant attack on our country.' Article content Article content Faced with 25 per cent tariffs on most Canadian exports to the U.S. and 50 per cent tariffs on its steel and aluminum, Canada needed to keep the trade talks alive. So Carney did what had to be done, stating that the move 'will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month's G7 Leaders' Summit in Kananaskis.' Article content The Liberals first introduced the DST in 2020 — a 3 per cent tax on big tech companies with Canadian digital revenues above $20 million per year — as a stopgap, with the real goal of pushing for a multilateral, OECD-led overhaul of the international tax system to curb multinational tax avoidance. Article content Article content Several countries, including France, the United Kingdom, Italy, and Spain, had begun implementing DSTs in 2019 and 2020, raising alarm bells for large U.S. tech firms and advocacy groups. Article content The Computer & Communications Industry Association (CCIA), a U.S.-based trade association representing technology and communications companies, was one that pushed back, calling the DSTs discriminatory. The taxes 'hit U.S. companies but are designed to exempt local companies, putting U.S. firms at a competitive disadvantage in the market,' said Jonathan McHale, VP of digital trade at CCIA. Article content President Joe Biden supported an OECD approach to reforming the international tax system – and its moratorium halting the rollout of unilateral DSTs, adopted by the OECD/G20 Inclusive Framework in late 2021. Canada waited in hopes of there being an international tax reform, but by July 11, 2023, when the OECD agreed to another year-long extension on the moratorium, Prime Minister Justin Trudeau's government decided it had waited long enough. It pushed ahead unilaterally to pass the Digital Services Tax Act last summer, despite warnings from U.S. diplomats and risk experts that it could spark a trade war.
Business Insider
a day ago
- Business
- Business Insider
US tech giants saved billions with Canada backing off its digital services tax
US tech giants came close to paying billions to Canada under a new tax law. Had Canada not halted a digital services tax enacted in 2024 that applies retroactively to 2022, US tech giants would have needed to pay Canada approximately $3 billion upfront on Monday, on top of a 3% levy on all revenue earned from digital services linked to Canadian users going forward. The Computer & Communications Industry Association estimated that Canada's tax measure would lead to annual losses of between $900 million and $2.3 billion for US firms and could result in up to 3,000 job losses in the country. In a separate estimate by Canada's Parliamentary Budget Officer in 2023, the DST would generate CA$7.2 billion in revenue for the government over five years, which is about $5.29 billion at the current exchange rate. The digital services tax, which is a tax on companies that earn revenue in Canada through social media advertisements and other online services, was halted on Sunday after President Donald Trump announced on his social media on Friday that the US would be "terminating ALL discussions on Trade with Canada" over the measure. Canadian Minister of Finance and National Revenue François-Philippe Champagne will introduce legislation to officially rescind the tax. US Treasury Secretary Scott Bessent also discussed launching a Section 301 investigation on Canada's tax measure on CNBC on Friday. "Today's announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month's G7 Leaders' Summit in Kananaskis," wrote Mark Carney, Canada's Prime Minister, in a statement posted by Canada's Department of Finance. The tax measure would have applied to tech companies with worldwide annual revenues greater than 750 million euros ($885 million) and Canadian digital services revenue greater than $20 million a year. Services subject to the tax include advertising, social media, and marketplaces, and large tech companies in the US, like Meta, Amazon, and Apple, would primarily be affected. Canada is the US's second-largest trading partner and the top buyer of US exports. According to the Census Bureau, the northern neighbour bought $349.4 billion in US exports in 2024 and exported $412.7 billion worth of goods across the border. Canada has been spared from some of Trump's highest tariffs, but still faces a 50% duty on steel and aluminum. Canada is not the first or the only country to propose a digital services tax. Both France and the UK have similar measures aimed at taxing revenue generated by large multinational digital companies. The White House has restarted trade talks with Canada following the scrapped tax policy. Carney's office, the White House, Meta, and Apple did not immediately respond to requests for comments.
LeMonde
2 days ago
- Business
- LeMonde
Canada rescinds tax hitting US tech firms, aims to resume negotiations with Trump
Canada is rescinding taxes impacting US tech firms that had prompted Donald Trump to call off trade talks in retaliation, Ottawa said Sunday, June 29, adding that negotiations with the US president would resume. Canadian Finance Minister Francois-Philippe Champagne "announced today that Canada would rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States," a government statement said. It added that Trump and Canadian Prime Minister Mark Carney "have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025." There was no immediate comment from the White House or Trump. The Republican president said Friday that he was ending trade talks between the North American neighbors over the tax, adding that Ottawa will learn of a new tariff rate on Canadian goods within a week. The digital services tax was enacted last year and is forecast to bring in Can$5.9 billion (US$4.2 billion) over five years. While the measure was not new, US service providers would have been "on the hook for a multi-billion dollar payment in Canada" come June 30, noted the Computer & Communications Industry Association recently. The 3% tax applies to large or multinational companies such as Alphabet, Amazon and Meta that provide digital services to Canadians, and Washington had previously requested dispute settlement talks over the matter. Canada has been spared some of the sweeping duties Trump has imposed on other countries, but it faces a separate tariff regime. Since returning to the White House in January, Trump has also imposed steep levies on imports of steel, aluminum and autos. Canada is the largest supplier of foreign steel and aluminum to the United States.
Business Times
2 days ago
- Business
- Business Times
Canada rescinds tax hitting US tech firms: government
[OTTAWA] Canada is rescinding taxes impacting US tech firms that had prompted Donald Trump to call off trade talks in retaliation, Ottawa said on Sunday, adding that negotiations with the US president would resume. Canadian Finance Minister Francois-Philippe Champagne 'announced today that Canada would rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States,' a government statement said. It added that Trump and Canadian Prime Minister Mark Carney 'have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025.' There was no immediate comment from the White House or Trump. The Republican president said Friday that he was ending trade talks between the North American neighbors over the tax, adding that Ottawa will learn of a new tariff rate on Canadian goods within a week. The digital services tax was enacted last year and forecast to bring in C$5.9 billion (US$5.4 billion) over five years. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up While the measure was not new, US service providers would have been 'on the hook for a multi-billion dollar payment in Canada' come June 30, noted the Computer & Communications Industry Association recently. The three per cent tax applies to large or multinational companies such as Alphabet, Amazon and Meta that provide digital services to Canadians, and Washington had previously requested dispute settlement talks over the matter. Canada has been spared some of the sweeping duties Trump has imposed on other countries, but it faces a separate tariff regime. Since returning to the White House in January, Trump has also imposed steep levies on imports of steel, aluminum and autos. Canada is the largest supplier of foreign steel and aluminum to the United States. AFP
