Canada has decided to rescind its digital services tax in order to avoid derailing trade talks with the United States. This decision comes after U.S. President Donald Trump announced that he would end negotiations over the levy, which would impact American tech giants such as Amazon, Google, and Netflix.
Prime Minister Mark Carney stated that removing the tax will allow Canada to resume trade negotiations with the United States, with the goal of reaching a trade deal by July 21. The digital services tax, which imposed a 3 percent tax on revenue earned by tech companies from digital services provided to Canadian users, was set to go into effect on June 30. This move would have left U.S. tech companies with a $2 billion bill to pay by the end of June.
The tax had been a point of contention for both the Biden and Trump administrations. Trump announced on June 27 that all trade discussions with Canada would be terminated due to the tax, stating that the U.S. would inform Canada of the tariffs they would be paying to do business with America within the next seven days.
Despite the tensions, Ottawa has been seeking new trade negotiations with the United States to minimize U.S. tariffs. Canadian Minister of Finance François-Philippe Champagne announced the removal of the tax, emphasizing that it would allow for progress in trade negotiations and support the creation of jobs and prosperity for Canadians.
Initially, Champagne had stated that Canada would not pause the digital services tax, but pressure from Canadian and U.S. business groups, as well as U.S. politicians, led to a change in stance. The tax was estimated to bring in $7.2 billion in revenue for Ottawa over five years.
In conclusion, the decision to rescind the digital services tax reflects Canada’s commitment to fostering a positive economic and trade relationship with the United States. By removing this barrier, both countries can move forward with negotiations and work towards a mutually beneficial agreement.
