The Canadian government scraps the digital service tax on the income of American tech companies to get the trade discussions with President Donald Trump’s government back on track. The Canadian Ministry of Finance declared this on Sunday evening, after Trump pulled the plug from the negotiations between the two neighboring countries on Friday.
Canadian Prime Minister Mark Carney will resume trade consultations with Trump, said his office. The aim is to reach a new trade agreement no later than 21 July. It must put an end to the trade war that Trump started against Canada, one of the largest trading partners in the US.
On Friday, Trump suddenly put an end to intensive trade discussions with the neighboring country because of the Canadian intention to continue the controversial Digital Services Tax. Trump called the tech load, aimed at the income of American tech giants in Canada, “a direct and flagrant attack on our country.”
Retroactive power
The digital service tax was aimed at companies with at least $ 14.7 million annually in income in Canada, and a global turnover of at least 820 million; In practice, this involved tech giants such as Amazon, Alphabet, Meta, Uber and Airbnb. The aim was to have the multinationals pay ‘their honest part’ on income they generate from Canadian users. The tax, introduced last year by Carney’s predecessor Justin Trudeau, had to be paid retroactively until 2022. The first payment had to be received by Monday.
Instead, the Ministry of Finance announced on Sunday evening that taxing is being stopped and that Minister François-Philippe Champagne “will submit legislation soon to withdraw the Digital Services Tax Act.” Representatives of the Canadian business community have already insisted on this in recent weeks to remove an obstacle during trade discussions.
Other countries have also introduced taxes on digital services that attract American tech companies, including the United Kingdom, France, Italy and Spain. It is unclear to what extent Trump, who has close ties with the tech bosses, will also make those taxes a stumbling block in trade discussions.
Canada is the second largest trading partner of the US, after Mexico, and the largest buyer of American exports. Last year Canada exported goods worth 412 billion dollars to the Zuiderburen, more than three -quarters of the total export of the country. Canada imported 349 billion dollars of American goods.
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