Canada Scraps Digital Tax
By Rebecca Grant: Over the weekend, Canada slammed the brakes on their Digital Services Tax after President Donald J. Trump threatened to end trade negotiations. U.S. companies, such as Amazon, Meta, Google, Apple, and Uber, could have been on the hook for an estimated $2 billion in fees and charges under the new Canadian tax. The formula imposed a 3% charge on Canadian revenue above $20M.
President Trump called out Canada for a “blatant attack” during his June 27 remarks at the White House, and reiterated the point on Truth Social. “Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump posted on Truth Social. He added that he would announce new tariffs of his own for Canada in a matter of days.
It took Ottawa less than 48 hours to reverse course. The tax collection will be halted, Canada announced on June 29.
“Thank you, Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America,” U.S. Secretary of Commerce Howard Lutnick posted on X on June 30.
Canada’s DST “requires foreign and domestic large businesses to pay tax on certain revenue earned from engaging with online users in Canada if they meet certain conditions.” Affected businesses apply to register for a DST program account and may have to file a DST return.
“Canada’s new government is focused on building the strongest economy in the G7 and standing up for Canadian workers and businesses,” stated Minister of Finance and National Revenue Francois-Philippe Champagne. “Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians.”
Experts believe the digital tax debate is “far from over” with 18 other countries imposing a tax, according to the Tax Foundation. The European Union’s VAT (Value-Added Tax) on e-commerce and online services increased by a factor of 7 between 2015 and 2022.
The bottom line: President Trump is on the warpath against separate digital service taxes, and America’s top allies are no exception.