
Canada has decided not to move forward with its Digital Services Tax (DST), which was originally set to begin on Monday. This strategic step aims to improve strained trade relations with the United States. The cancellation follows backlash from former U.S. President Donald Trump, who called the proposed tax an “attack” and warned of retaliatory tariffs on Canadian goods.
The tax would have applied a 3% levy on digital revenues generated in Canada by large American tech companies like Amazon, Google, Apple, and Meta, provided those earnings exceeded CAD 20 million annually. Over five years, the tax was expected to bring in around CAD 5.9 billion, with more than CAD 2 billion forecasted for the first year alone.
Finance Minister François‑Philippe Champagne stated that the government would now introduce new legislation to officially scrap the tax and end any plans for collection. He also emphasized Canada’s commitment to working toward an international solution for taxing major digital corporations.
According to White House economic adviser Kevin Hassett, dropping the DST opens the door for trade negotiations between the two countries to resume. U.S. Commerce Secretary Howard Lutnick echoed this sentiment, noting that the tax had been a major sticking point in ongoing discussions.
The U.S. remains Canada’s largest trading partner, receiving about 75% of its exports—worth over USD 400 billion annually. In contrast, Canada represents about 17% of U.S. export volume. The American Chamber of Commerce praised Canada’s move as a positive development for cross-border business relations.
The DST had been controversial for some time, with both the Trump and Biden administrations arguing that it could damage economic ties. Canada’s plan to apply the tax retroactively from January 2022 further intensified criticism. Michael Geist, a law professor at the University of Ottawa, described the rollout as poorly handled. Meanwhile, Canadian business leaders warned that tech firms would likely pass the added costs onto consumers.