By Zdravko Yazhikov
Canada rescinded its Digital Service Tax (DST) aimed at US tech companies hours before the first payments were due on Monday 30th June, to revive trade talks with the United States.
Introduced in 2020, the tax was going to hit giants such as Amazon, Meta, Google, Uber, and Airbnb with a 3% charge on revenues above $20 million generated in Canada.
The legislation was to apply retroactively to 2022, meaning US firms had until the end of the month to pay $2 billion to the Canadian state.
The U-turn comes after US President Trump halted the negotiations with Canada on Friday, June 27, saying the tax was a “direct and blatant attack on our country” and threatened to impose higher import tariffs on its northern neighbour.
“Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress,” Canadian Finance Minister François-Philippe Champagne said.
“…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,” Prime Minister Mark Carney announced, following a call with Trump on Sunday, June 29.
He added that scrapping the DST will “support a resumption of negotiations toward the July 21 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis.”
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US officials hail Canada’s decision
The announcement of the tax U-turn was hailed in the US as a step in the right direction that will get Canada back on the negotiating table.
“It’s very simple. Prime Minister Carney and Canada caved to President Trump and the United States of America,” press secretary Karoline Leavitt said.
“The President made his position quite clear to the Prime Minister and the Prime Minister called the President last night to let the President know that he would be dropping that tax.”
US Commerce Secretary Howard Lutnick thanked Canada for scrapping the tech tax, saying it was going to “stifle American innovation and would have been a deal breaker for any trade deal with America”.
“This is a constructive decision that allows both countries to focus on strengthening their economic partnership,” Rick Tachuk, President of the American Chamber of Commerce, said.
Decision attracts polarising opinions at home
Contrary to their American counterparts, the Canadian officials were divided on Carney’s decision to sacrifice the long-awaited tech tax to advance the trade negotiations with the Trump administration.
The Vice President of Government Relations at the Canadian Chambers of Commerce, David Pierce, said the decision makes sense.
“This tax would have fallen on Canadian consumers, businesses, and investors in the form of higher costs and hurt our economy at a critical time.”
In his opinion, the Government’s last-minute change of heart “moves us one step closer to a renewed, reliable trade deal”.
Michael Geist, lecturer and Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, disagrees, claiming the country was left in a “no-win situation”.
“Unfortunately, the government has too often viewed tech primarily as a source of revenue for policy projects – the proverbial ‘make web giants pay’ – while overestimating the attractiveness of the Canadian market and underestimating the risks of costly regulation,” he wrote in a blog post.
“Canada desperately needs a tech regulation reset. Perhaps the embarrassment of walking away from $7bn will provide the wake-up call.”
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Newsjustnews writers 
Geoffrey H. Latayan