Canada has decided to cancel a digital services tax in an attempt to restart trade negotiations with the United States.
The deciosn to rescind plans to tax online companies comes after US President Donald Trump on Friday canceled trade talks with Canada. Trump called the tax “a direct and blatant attack on our Country.”
Canada Cancels Digital Services Tax To Restart Talks With US
Canadian government on Sunday issued a statement, it has decided to cancel the tax in order support the trade talks with US.
“To support those negotiations, the Minister of Finance and National Revenue, the Honourable François-Philippe Champagne, announced today that Canada would rescind the Digital Services Tax (DST) in anticipation of a mutually beneficial comprehensive trade arrangement with the United States,” the statement said.
The statement added that Prime Minister Carney and President Trump will resume the talks so that a deal is finalized before July 21.
“Consistent with this action, Prime Minister Carney and President Trump have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025.”
What Is Canada’s Digital Services Tax?
Digital services taxes are a way for countries to tax online services, in contrast to taxes on physical products.
The Canadian DST which is a tax on online services, was set to take effect on Monday. The tax was sset to be implemented with a retrospective effect starting 2022.
Canada’s Digital Services Tax Act (DSTA) first came into effect in June last year. It collects tax on tech revenues generated from Canadian users. Under this act even those providers are taxed who do not have a physical presence in the Canada.
Prime Minister Justin Trudeau first proposed the DSTA during the 2019 federal election. It received an approval in Canada on June 20, 2024 and came into force on June 28. The first payments of this tax were due on Monday, June 30, 2025 however the government has decided to rescinf the act.
What Comes Under Canada’s Digital Services Tax?
Under the act, large technology firms having global revenues more than $820m and Canadian revenues of more than $14.7m have to pay a 3 percent tax on some digital services revenues earned in Canada. This tax targets gross revenue linked to Canadian user engagement unlike tax based on profits.
The act proposes to collect tax on online marketplaces, social media platforms, digital advertising and the sale or licensing of user data.
Trump has repeatedly threatned Canada to levy 25% tariff despite being its major trading partneer. Canada is the top importer of US goods. In 2024, it imported goods worth $349 billion from US while exporting goods worth $413 billion.
Also Read: Donald Trump Says He Won’t Extend July 9 Tariff Deadline, Threatens US Can Shorten It Instead
