Canada rescinds digital services tax to advance trade discussions with the United States
The federal government made a significant announcement late Sunday evening regarding the digital services tax, stating that it would be rescinded in response to U.S. President Donald Trump’s demands. This decision comes days after Trump cut off Canada-U.S. trade negotiations due to the imposition of the tax.
In a press release, the government explained that the tax would be rescinded “in anticipation of a mutually beneficial comprehensive trade arrangement with the United States.” Prime Minister Carney and President Trump have agreed to resume negotiations with the goal of reaching a deal by July 21, 2025.
Finance Canada confirmed that the tax collection, which was set to begin on Monday, will be halted. Finance Minister François-Philippe Champagne will soon introduce legislation to rescind the Digital Services Tax Act.
In a social media post, Champagne emphasized that Canada is engaged in complex negotiations for a new economic and security partnership with the U.S. The decision to rescind the tax is intended to facilitate progress in the negotiations and support job creation and prosperity for Canadians.
Following Trump’s announcement on Friday to end trade discussions with Canada over the digital services tax, tensions escalated. The policy would have required U.S. tech giants like Amazon, Google, Meta, Uber, and Airbnb to pay three percent of their Canadian user revenues. With the tax being applied retroactively, U.S. companies faced a $2 billion bill due at the end of the month.
The DST was introduced as a means to ensure that global digital firms pay their fair share of taxes in the countries where they operate. However, Trump viewed the tax as detrimental to U.S. interests and criticized Canada for adopting a taxation strategy similar to Europe.
In addition to the digital services tax, Trump also raised concerns about Canada’s supply management system and high tariffs on U.S. dairy products. However, it was clarified that these tariffs only apply when exports exceed set quotas, with the majority of agricultural products traded between the two countries being tariff-free under the Canada-United States-Mexico Agreement.
The decision to rescind the digital services tax reflects a commitment to fostering positive trade relations between Canada and the U.S. Moving forward, both countries will continue negotiations with the aim of reaching a mutually beneficial agreement.
