Canada Cancels Tech Tax, Reopens Trade Talks with US

In a sudden turn, Canada has scrapped a tax on major US tech firms. This move, just before the tax’s initial payments were due, aims to revive strained trade negotiations between the two nations.

Tax U-Turn

Canada is set to eliminate its digital services tax, which would have imposed a 3% levy on revenue exceeding $20 million from US tech giants. François-Philippe Champagne, Canada’s finance minister, announced the tax’s rescinding in a statement. This comes after pressure from the United States.

Great news! Canada is removing their digital services tax, which was a deal breaker for any trade deal with America. Thank you Canada! #TradeDeals

— Sec. Howard Lutnick (@SecLutnick) March 11, 2024

“The 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,”

—François-Philippe Champagne, Canada’s Finance Minister

The United States is Canada’s primary trading partner, with over 75% of Canada’s exports heading south. In 2023, bilateral trade in goods and services between the US and Canada totaled approximately $883.6 billion (Office of the United States Trade Representative).

Political Maneuvering

The original tax was expected to generate over $5.9 billion for Canada within five years. Donald Trump, during his presidency, opposed similar taxes, and described Canada’s policy as “egregious.” Kevin Hassett, a White House economic adviser, anticipates that negotiations will restart.

The situation underscores the complexities of global trade and the power of negotiation. The impact on trade relations will be watched closely by businesses and governments worldwide.