Ontario [Canada], July 1 : Canada has officially withdrawn its proposed digital services tax, aiming to revive trade negotiations with the US, just days after US President Donald Trump halted discussions in protest of the levy, Al Jazeera reported on Monday.
As per Al Jazeera, Canadian Prime Minister Mark Carney on Sunday announced that he and President Trump had reached an agreement to restart talks, targeting a July 21, deadline outlined at the recent G7 Leaders' Summit in Kananaskis.
The now-scrapped tax, which was set to take effect from Monday, would have imposed a 3 per cent levy on revenues earned by digital services companies from Canadian users above USD 20 million in a calendar year, retroactive to 2022, as per Al Jazeera.
It was intended to target online platforms, digital advertising, social media, and data monetisation, impacting major US tech firms such as Apple, Google (Alphabet), Amazon, and Meta.
President Trump denounced the tax on Friday, calling it "a direct and blatant attack on our Country," in defence of American tech giants, as reported by Al Jazeera.
Criticism followed the Canadian government's decision to withdraw the tax.
Tech analyst and journalist Paris Marx told Al Jazeera that the move signals Canada's vulnerability to US pressure, arguing that digital services taxes are crucial to ensuring large multinational tech firms contribute fairly to the countries in which they operate.
Marx pointed out that the Organisation for Economic Co-operation and Development's (OECD) efforts to establish a global framework for digital taxation have stalled largely due to US resistance under both the Biden and Trump administrations, leading many countries to adopt their own taxes.
"It has been continually delayed for years in the hope that a diplomatic process in the OECD would create an international framework to ensure those companies pay more tax in countries around the world. But the United States, under [former US President Joe] Biden and Trump, has ensured it's been unable to move forward... More countries are enacting digital services taxes for that very reason, and Canada is wrong to back down," he stated as quoted by Al Jazeera.
Canada's Finance Ministry confirmed the suspension of tax collection and said Finance Minister Francois-Philippe Champagne will introduce legislation to repeal the Digital Services Tax (DST) Act.
The ministry reiterated that the DST was originally introduced in 2020 to address the low tax burden of large tech companies operating in Canada but emphasised Canada's preference for a multilateral solution, as reported by Al Jazeera.
As per Al Jazeera, citing the US Census Bureau, Canada is a major trading partner for the US, second only to Mexico, and purchased USD 349.4 billion worth of American goods last year, while exporting USD 412.7 billion to the US.
While Canada avoided sweeping US tariffs introduced in April, it still faces a 50 per cent duty on steel and aluminium exports to the US, Al Jazeera reported.
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