{"id":1088,"date":"2025-07-07T10:00:00","date_gmt":"2025-07-07T10:00:00","guid":{"rendered":"http:\/\/logicalware.net\/?p=1088"},"modified":"2025-07-08T19:15:22","modified_gmt":"2025-07-08T19:15:22","slug":"canadas-walk-back-of-digital-services-tax-boosts-big-tech-spells-trouble-for-similar-efforts","status":"publish","type":"post","link":"http:\/\/logicalware.net\/index.php\/2025\/07\/07\/canadas-walk-back-of-digital-services-tax-boosts-big-tech-spells-trouble-for-similar-efforts\/","title":{"rendered":"Canada\u2019s walk back of digital services tax boosts Big Tech, spells trouble for similar efforts"},"content":{"rendered":"

Canada\u2019s decision to rescind its digital services tax<\/a> (DST) to restart trade negotiations with the U.S. represents a boon for major tech firms and could be a harbinger for similar measures in other countries, experts told The Hill.\u00a0<\/p>\n

The Canadian government\u00a0announced\u00a0late Sunday it would scrap the tax on U.S. tech firms that was set to take effect Monday in a bid to bring the Trump administration back to the table<\/a> and avoid heightened tariffs<\/a> in the coming weeks.\u00a0<\/p>\n

The move was successful for Ottawa, with the White House saying that trade talks would\u00a0resume<\/a>\u00a0immediately. It was also cheered by the tech industry, which has lambasted digital services taxes as \u201cunfair\u201d and \u201cdiscriminatory.\u201d\u00a0<\/p>\n

But experts say Canada’s move could put pressure on other nations to follow suit and rescind their tech taxes.<\/p>\n

\u201cGoing forward, I think the fact that Trump managed to bully or cajole Canada into dropping its [digital services tax] means that this will be a big item that he insists on in talks with Europe and any countries in all these trade negotiations,\u201d said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics. <\/p>\n

\u201cI see this as a harbinger of a more general repeal of digital services taxes,\u201d he added, calling it a \u201cpretty big deal and a real victory for Trump.\u201d <\/p>\n

Since taking office for a second time, Trump has repeatedly criticized<\/a> taxes and fines on U.S. tech firms. He slammed the European Union (EU) in January, alleging that the bloc\u2019s hefty fines against American companies amount to a\u00a0\u201cform of taxation.\u201d\u00a0<\/p>\n

The EU\u2019s top court ruled in September that\u00a0Apple owed more than $14 billion<\/a> in back taxes to Ireland, while upholding a $2.7 billion fine<\/a>\u00a0against Google\u00a0by European antitrust regulators.\u00a0\u00a0<\/p>\n

Meta, the parent company of Facebook and Instagram, was also\u00a0fined about $840 million for antitrust violations<\/a> in November. The social media giant was hit with another $228 million fine in April, alongside Apple, which faced a $570 million penalty.\u00a0<\/p>\n

Trump railed against the EU during a meeting with the NATO secretary-general<\/a> in March, calling the European bloc\u00a0\u201cnasty\u201d over the tech fines, as well as a tariff on U.S.-made cars.\u00a0<\/p>\n

\u201cThey\u2019re suing Google, they\u2019re suing Facebook, they\u2019re suing all of these companies, and they\u2019re taking billions of dollars out of American companies,\u201d he said at the time.  <\/p>\n

The president has also taken aim at digital services taxes in particular, signing an executive order in February<\/a> slamming the taxes as \u201cdesigned to plunder American companies\u201d and\u00a0declaring the U.S. would respond to such measures with tariffs or other actions.\u00a0<\/p>\n

DSTs are taxes on tech companies from countries where their products are used. Canada sought to impose a 3 percent charge on revenues above $14.57 million, or 20 million Canadian dollars. Given the retroactive nature of the tax, companies were preparing to pay nearly $2 billion on Monday. <\/p>\n

The United Kingdom, France, Italy and numerous other countries have enacted similar tech taxes, with several others, like Germany, weighing their own. <\/p>\n

After Canada doubled down on its commitment to its digital services tax last week, Trump\u00a0suspended trade talks<\/a>\u00a0and vowed to hit Ottawa with higher tariffs, calling the tax a \u201cdirect and blatant attack on our Country.\u201d\u00a0<\/p>\n

\u201cBased on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,\u201d he wrote on Truth Social. <\/p>\n

The Canadian government quickly backed down and stripped the tax, with Prime Minister Mark Carney emphasizing his government<\/a> \u201cwill always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses.\u201d\u00a0<\/p>\n

\u201cIt’s a big climb down by Canada,\u201d Hufbauer said. \u201cI think was very sensible for them to do it because what\u2019s at stake and the ongoing trade talks is far larger than whatever Canada might collect on the [digital services tax].\u201d <\/p>\n

Tech industry groups cheered the announcement. The Computer and Communications Industry Association (CCIA) called the move \u201cencouraging\u201d and urged other governments to follow Canada\u2019s lead. The Information Technology and Innovation Foundation (ITIF) similarly suggested it was the \u201cright decision.\u201d <\/p>\n

However, it could set a precedent, as the U.S. continues to negotiate with other countries ahead of a July 9 deadline when Trump\u2019s 90-day pause<\/a> on most country-specific tariffs is set to expire.\u00a0<\/p>\n

\u201cCanada doesn\u2019t want to die on this hill, so they\u2019re going to move past it, and I think it\u2019s a positive relative to getting some sort of deal framework done,\u201d Wedbush Securities analyst Dan Ives told The Hill. \u201cBut it also sets a blueprint for others that head down the path with the U.S.\u201d <\/p>\n

\u201cCanada conceding that they\u2019re going to have to move away from this, it opens up a Pandora\u2019s box, especially with the EU,\u201d he added.\u00a0<\/p>\n

The Trump administration could take aim at Europe with Section 301 tariffs, which are import taxes used to target countries considered to be engaged in unfair trading practices, noted Daniel Bunn, president and CEO of the Tax Foundation. <\/p>\n

\u201cThere are findings from the first Trump administration and a specific executive order on digital services taxes that could lead to Section 301 retaliatory tariffs any day really,\u201d Bunn said. \u201cThose findings already exist. They\u2019ve already checked the box on the procedure there. So, if they are interested in building momentum, then they have the opportunity to do so.\u201d <\/p>\n

Trump already appears to have his eye on the EU, suggesting Friday that Canada was \u201cobviously copying\u201d the bloc with its digital services tax and that the issue \u201cis currently under discussion.\u201d <\/p>\n

The EU itself does not impose such a tax, even though some of its members do. It has passed two key tech laws, the Digital Services Act<\/a> (DSA) and Digital Markets Act<\/a> (DMA), which have been responsible for several large fines against U.S. tech firms. \u00a0<\/p>\n

A draft agreement obtained by\u00a0The Wall Street Journal<\/a>\u00a0last month suggested the U.S. would engage in talks with the European bloc on the DMA, pausing enforcement on American companies in the meantime. \u00a0<\/p>\n

However, the European Commission \u2014 the EU\u2019s executive arm \u2014 has pushed back on the suggestion that either law is part of trade negotiations. <\/p>\n

“Our legislation will not be changed,\u201d commission spokesperson Thomas Regnier said, according to Reuters. \u201cThe DMA and the DSA are not on the table in the trade negotiations with the U.S.\u201d\u00a0<\/p>\n

While Hufbauer seemed skeptical of Trump\u2019s ability or desire to push for the repeal of the two tech laws, he suggested the U.K. and potentially the EU could be pressured into pulling back on their DSTs.<\/p>\n

Others are less convinced about the ripple effects of Canada\u2019s decision. Edward Alden, a senior fellow at the Council on Foreign Relations, emphasized Ottawa is in a \u201cuniquely vulnerable situation.\u201d\u00a0<\/p>\n

\u201cThe Europeans are in a much stronger position,\u201d Alden said. \u201cThey have a market that\u2019s collectively roughly the size of the U.S. market. Their retaliation has some significant effects on U.S. companies.\u201d  <\/p>\n

\u201cThe Canadians are just in a much weaker position because 75 percent of their exports go to the United States,\u201d he continued. \u201cSo I think this was a decision by the Carney government in Canada that it couldn\u2019t be out in front in this particular battle with the United States.\u201d  <\/p>\n

However, he also noted that he \u201cwould not be surprised\u201d if the Europeans were willing to negotiate away their digital services taxes as part of a broader deal. <\/p>\n

Canada\u2019s decision could also empower tech companies to push back on the taxes, Alden added. <\/p>\n

\u201cRather than seeing [Trump\u2019s] trade policies as disruptive, which they obviously are in certain ways, [they are] seeing them as a potential tool to tackle some foreign practices they dislike,\u201d he said. \u201cSo, I think this will embolden the tech companies to continue pressuring other countries that have implemented or are considering implementing similar measures.\u201d <\/p>\n","protected":false},"excerpt":{"rendered":"

Canada\u2019s decision to rescind its digital services tax (DST) to restart trade negotiations with the U.S. represents a boon for major tech firms and could be a harbinger for similar<\/p>\n

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