Canada announced that it has restarted negotiations with the United States after it suspended its digital tax.
“Canada’s new government is focused on building the strongest economy in the G7 and standing up for Canadian workers and businesses,” said Canadian Finance Minister François-Philippe Champagne. “Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians.”
The digital service tax (DST) was announced in 2020 to “address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians,” a government news release states. “Canada’s preference has always been a multilateral agreement related to digital services taxation. While Canada was working with international partners, including the United States, on a multilateral agreement that would replace national digital services taxes, the DST was enacted to address the aforementioned taxation gap.”
Prime Minister Mark Carney and President Donald Trump hope to reach an agreement by July 21.
“In our negotiations on a new economic and security relationship between Canada and the United States, Canada’s new government will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses,” Carney declared.
U.S. Commerce Secretary Lutnick thanked Canada for removing the tax, noting it was “intended to stifle American innovation and would have been a deal breaker for any trade deal with America.”
The 2025 National Trade Estimate Report said that most digital services taxes “have been designed in ways that discriminate against U.S. companies, as they single out U.S. firms for taxation while effectively excluding national firms engaged in similar lines of business.”
“Canada’s DST creates significant retroactive tax liabilities with immediate consequences for U.S. companies,” the report noted.
