Canada has withdrawn its planned digital services tax targeting U.S. technology giants, just hours before it was due to take effect on June 30. The last-minute decision is aimed at reviving stalled U.S.-Canada trade negotiations after Donald Trump slammed the levy as a “direct and blatant” attack on American companies.
The now-scrapped tax would have imposed a 3% charge on the Canadian revenue of major digital platforms like Meta, Netflix, and Amazon. First introduced in 2020, the Digital Services Tax (DST) also covered some local tech businesses and was projected to generate C$7.2 billion (US$5.3 billion) in federal revenue over five years, according to a December 2023 estimate by Canada’s Parliamentary Budget Office.
Finance Minister François-Philippe Champagne announced the reversal late Sunday, saying it would “reinforce our work to create jobs and build prosperity for all Canadians.” He added that removing the DST would allow meaningful progress in negotiating “a new economic and security relationship” with the U.S.
Prime Minister Mark Carney echoed this stance, confirming the decision would support “a resumption of negotiations towards the July 21 timeline” set during this month’s G7 summit in Kananaskis, Alberta. Both leaders emphasized the tax repeal as a strategic move to stabilize Canada-U.S. economic relations under the renewed spotlight of Trump-era trade volatility.
Trump, who on Friday said he was “terminating” trade talks with Canada in response to the DST, doubled down during a Sunday Fox News appearance, claiming, “Canada is very nasty to deal with.”
The DST required affected companies to file returns by June 30 or face fines, putting additional compliance pressure on both foreign and domestic firms. Its removal eliminates a major flashpoint just as diplomatic efforts intensify ahead of the July 21 negotiation deadline agreed by Carney and Trump.
By abandoning the digital tax, Canada seeks to de-escalate the trade war and foster a renewed economic partnership with the US. The move underscores the delicate balance between domestic policy goals and maintaining critical trade ties with its largest trading partner.
