Prime Highlights
- U.S. and Canadian business executives urge Ottawa to delay or repeal the retroactive Digital Services Tax by June 30.
- Panic mounts over potential U.S. backlash, threatening pensions, trade relations, and investments by big tech companies.
Key Facts
- The 3% levy targets global tech giants with over CA$20 million Canadian digital revenues and global sales exceeding €750 million.
- U.S. businesses will bear 90% of the tax burden, increasing as much as CA$7.2 billion over five years.
Key Background
Canada’s 3% Digital Services Tax (DST) is levied on large technology companies that earn significant amounts of money from Canadian digital consumers. The tax is directed at companies such as Amazon, Google, Meta, and Uber and is retroactive from 2022 and to be charged from June 30, 2025. The Canadian government has implemented this tax as a way of getting the tech firms to pay their fair share into the local economy, especially in the face of rising digital platform supremacy.
Canadian and American business interests are raising the alarm. The Canadian Chamber of Commerce and American technology lobbyists argue that the retroactive nature of the tax undermines business confidence and has the potential to damage Canada–U.S. trade relations. They warn that imposing this tax on a vulnerable period in the midst of trade negotiations has the potential to result in retaliatory American tariffs.
A delegation of 21 American lawmakers has also demanded Ottawa rethink. They say the tax disproportionately targets U.S.-based firms and could set off a wave of retaliatory actions, taxing Canadian investments and pensions held in U.S. financial systems. Industry participants are concerned this could hurt Canadian pensioners and investors.
With Canada already engaged in discussions for an even broader trade agreement with the United States, most analysts see postponing or removing the DST as reducing diplomatic tensions. Entrepreneurs continue to call on Ottawa to seek a multilateral resolution, rather than risking the chance of unilateral action which could get out of control and turn into a trade war.
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