Canada Halts Digital Tax On US Tech Firms To Initiate Trade Talks

Canada has withdrawn its proposed Digital Service Tax (DST) on major US technology firms just hours before it was scheduled to take effect, Finance Minister François-Philippe Champagne announced. The decision comes amid escalating tensions between Canada and the United States, following the strong opposition from US President Donald Trump, who described the measure as a "blatant attack" and threatened retaliatory tariffs on Canadian imports.

The now-revoked DST would have imposed a 3% levy on Canadian revenues exceeding $20 million generated by US-based technology giants such as Amazon, Meta, Google, and Apple. Estimates indicated that the tax would have cost the companies over $2 billion annually. Initially introduced in 2020, the DST aimed to address the perceived tax avoidance by large digital firms operating in Canada without contributing proportionately to domestic tax revenues. In a statement, Champagne reaffirmed Canada's support for a multilateral solution to digital taxation, stating, "Canada’s preference has always been a multilateral agreement related to digital services taxation."

The suspension of the tax is viewed as a strategic move to resume trade negotiations, which stalled after Trump abruptly withdrew from discussions last Friday. The two leaders, Prime Minister Mark Carney and President Trump, had earlier agreed during the G7 summit in mid-June to conclude a new economic framework within 30 days. The negotiations are now expected to recommence on July 21. Currently, Canada exports over 75% of its goods to the US, accounting for more than $400 billion annually, while it receives only 17% of total US production.