Canada has decided to cancel its planned digital services tax to help restart trade talks with the United States. This announcement comes just days after President Donald Trump halted negotiations in response to the tax, which he claimed was unfairly targeting American tech companies.
Prime Minister Mark Carney stated that he and Trump have agreed to resume discussions, aiming for a timeline set during this month’s G7 Leaders’ Summit. The digital services tax, which was supposed to take effect soon, would have imposed a 3% levy on revenue from Canadian users for tech companies making over $20 million annually. It was designed to ensure that large tech firms contribute their fair share of taxes in Canada.
Trump criticized the tax as a direct attack on the U.S. and its technology giants, which include major companies like Apple, Google, Amazon, and Meta. Canadian tech journalist Paris Marx expressed concern that Canada’s decision to drop the tax shows a willingness to bend to U.S. pressure. He noted that many countries are introducing similar taxes because multinational tech companies often do not pay enough tax.
The Canadian government had announced the digital tax in 2020 to address this issue. However, it had been delayed multiple times, hoping for a global agreement through the OECD to create a fair tax framework. Now, Canada’s finance ministry has stated that the collection of this tax will cease, and legislation to officially rescind it will be introduced.
Canada is a significant trading partner for the U.S., ranking second after Mexico. Last year, Canada imported $349.4 billion worth of goods from the U.S. and exported $412.7 billion back. While Canada had previously avoided Trump’s broad tariffs, it still faces high duties on steel and aluminum imports.
The cancellation of the digital services tax marks a significant shift in Canada’s approach to taxation of technology companies. The government hopes this move will lead to a more favorable environment for trade negotiations with the U.S.