Canada has withdrawn its digital services tax (DST) on technology companies such as Meta Platforms Inc and Alphabet Inc in a move to restart trade talks with the US.
“Rescinding the DST will allow the negotiations to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians,” Canadian Minister of Finance Francois-Philippe Champagne wrote on social media late on Sunday.
On Friday afternoon, US President Donald Trump said he was ending all trade discussions with Canada, one of its largest trading partners, in retaliation for the digital tax. He also threatened to impose a fresh tariff rate within a week.
Photo: Reuters
Instead, Trump and Canadian Prime Minister Mark Carney agreed the countries would restart negotiations and try to agree on a deal by July 21. The Canadian dollar strengthened on the news.
For Canada, the economic stakes of those discussions are huge. About three-quarters of its exports go to the US, including the vast majority of its oil and many other commodities, as well as most of the cars and trucks it produces.
However, the US also has something on the line: Canada is the largest buyer of US products. Last year, the US exported about US$440 billion of goods and services to its northern neighbor and imported US$477 billion from it, US government data showed.
The first payment for Canada’s digital tax was supposed to be due yesterday.
The tax, which was passed into law last year by the previous government of former Canadian prime minister Justin Trudeau, was meant to charge 3 percent of the digital services revenue a firm makes from Canadian users above C$20 million (US$14.6 million) in a calendar year.
It would have cost large technology companies billions of dollars. A number of states, including the UK, has such taxes in place.
Instead, Canada would suspend the payments that were due and create legislation to repeal the digital tax entirely, the Canadian Department of Finance said.
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