Canada has officially withdrawn its proposed Digital Services Tax (DST) in a move aimed at resuming stalled trade negotiations with the United States, Al Jazeera reported on Monday. The development comes just days after US President Donald Trump abruptly halted discussions in protest of the tax.
According to the report, Canadian Prime Minister Mark Carney announced on Sunday that he and President Trump had reached an agreement to restart talks, targeting July 21 as the new deadline for progress—outlined during the G7 Leaders’ Summit in Kananaskis.
The now-scrapped DST would have imposed a 3% levy on revenues exceeding USD 20 million annually earned by digital services companies from Canadian users, retroactive to 2022. The tax was aimed at targeting online platforms, social media, digital advertising, and data monetisation, with major US tech firms such as Google (Alphabet), Apple, Amazon, and Meta in its crosshairs.
President Trump slammed the tax on Friday, stating:
“A direct and blatant attack on our Country,” in a strong defence of American technology giants, Al Jazeera reported.
The decision to drop the tax drew criticism from tech journalist and analyst Paris Marx, who told Al Jazeera the move revealed Canada’s vulnerability to US pressure.
“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 said.
The Canadian Finance Ministry confirmed the suspension of tax collection and stated that Finance Minister Francois-Philippe Champagne will introduce legislation to repeal the DST Act. While the DST was initially introduced in 2020 to address the low tax burden of multinational tech giants in Canada, the ministry stressed its preference for a multilateral solution.
Trade data underscores the significance of US-Canada ties: the US Census Bureau cited Canada as America’s second-largest trading partner after Mexico. In 2023, Canada imported USD 349.4 billion in American goods and exported USD 412.7 billion to the US.
Although Canada avoided the broader US tariffs imposed in April, it continues to face a 50% duty on steel and aluminium exports, according to the report.