What is the digital tax in Canada and why does Trump kill trade talks about it? | Business and Economics News

With Canada’s progress with new Digital services tax On foreign and local technology companies, US President Donald Trump, by ending all commercial talks and threatening to impose additional fees on exports from Ottawa.

In a post on the social truth platform on Friday, Trump called the new Canadian tax temple “a direct and frank attack on our country”, adding that Canada is “a very difficult country to trade it.”

“Based on this terrible tax, we end all discussions about trade with Canada, immediately effective,” he wrote. He added that he would announce a new tariff on its own to Canada within days.

American companies such as Amazon, Meta, Google and Uber face about $ 2 billion of bills under the new tax.

Trump’s decision is a sharp return to commercial tensions between the two countries, as it suddenly ended a cooperative stage since Mark Carney was elected as Prime Minister in Canada in March.

It also represents an additional escalation in trade tactics as pressure under Trump’s second state in Washington.

The United States is largely the largest commercial partner in Canada, with more than 80 percent of Canadian exports to the United States. In 2024, the total bilateral commodity trade exceeded $ 762 billion, as Canada topped 412.7 billion dollars and imported 349.4 billion dollars-blessing the United States, which is Canada, the second largest trading partner, with 63.3 billion dollars in good deed.

Disorder due to customs tariffs can be on products such as cars, minerals, energy or aluminum significant effects on both economists.

So, what is the digital tax in Canada? Why does Carney face a local passenger on taxes? How does Washington respond?

What is the digital services tax in Canada?

The DVA law in Canada (DSTA) entered into force in June last year. It is a tax on technology revenue created by Canadian users – even if service providers do not have a physical presence in the country.

DSTA was proposed for the first time during the 2019 federal elections during the reign of then Minister of Ministers, Justin Trudeau, and obtained approval in Canada on June 20, 2024. It came into effect a week later, on June 28. The first payments of this tax are due on Monday, June 30, 2025.

The large technology companies whose global revenues exceed $ 820 million and Canadian revenues, which are more than 14.7 million dollars, must pay 3 percent on some revenues of the digital services acquired in Canada. Unlike traditional companies ’taxes based on profits, this tax targets the total revenue associated with the participation of the Canadian user.

Digital services that will be applied to the tax to include: online markets, social media platforms, digital ads and sale or license user data.

One of the most controversial parts in the new framework of companies is its nature retroactively, which requires payments on revenues dating back to January 1, 2022.

Why is Trump suspending trade talks about the new tax?

On June 11 / they wrote: “If Canada decides to move forward with this unprecedented tax and a retroactive impact, a terrible precedent will have long -term effects on global tax and commercial practices.”

After that, in a social publication in fact this week, Trump said that Canada confirmed that it will continue to tax new digital services “on our American technology companies, which is a direct attack and beating on our country.”

He added that the United States will “end all discussions about trade with Canada, immediately”, and that it will display its own new tariff to Canada within seven days.

“Our farms have imposed up to 400 % of the customs tariffs, for years, on dairy products,” Trump said, adding: “We will tell Canada to know the tariff that will push them to work with the United States of America during the next seven days.”

Later, in the Oval Office, Trump doubled, saying: “We have all the cards. We have each one.” He pointed out that the United States carries “such a force on Canada (economically).” “We prefer not to use it,” Trump said.

“Most of their work is with us, and when you have this circumstances, you treat people better.”

Trump also said that he would request an investigation into Article 301 under the Trade Law to assess the impact of DSTA on American trade, which may lead to other punitive measures.

On Friday, the director of the National Economic Council of the White House, Kevin Haysit, told Fox Business Friday: “They are imposed on American companies that do not necessarily have the presence in Canada.”

He said: “They will have to remove her tax.

How did Canada respond?

Relationships have looked more friendly between the two neighbor of North America in recent months as they continued in commercial talks. Trump and former Prime Minister Justin Trudeau clashed – with Trump’s call to Trumpo “Very unreasonable” and “weak” During the G7 2018 conversations in Canada.

But the newly -elected Carney enjoyed a friendly visit with Trump in May at the White House, while Trump traveled to Canada to get the 7 -year -old Group Chapter on June 16 and 17. Carney said at the summit that the two had set a 30 -day deadline for commercial talks.

In a brief statement on Friday, Prime Minister Carney’s office on Trump’s new threats to suspend commercial talks on the digital tax: “The Canadian government will continue to participate in these complex negotiations with the United States in the interest of workers and Canadian companies.”

Last week, Canadian Finance Minister Francois Philip told reporters that the digital tax can be negotiated as part of the broader and continuous discussions in the United States and Canada. “It is clear that everything we consider is part of the broader discussions that you may hold,” he said.

These discussions were expected to lead to a trade agreement in July. However, it is now forgetting.

What do Canadian business leaders say?

Carney also faces pressure from local companies, which pressured the government to stop the digital services tax, which confirms that the new framework will increase the costs of providing services and warn of revenge on the United States.

“I have warned that the implementation of the one -sided digital services tax may risk undermining the economic relationship in Canada with its most important commercial partner, the United States,” said the Business Council in Canada, a non -profit organization that represents the CEOs and leaders of the major Canadian companies, in a statement, for years.

The statement indicated that “this unfortunate development has come now.” “In an attempt to restore trade negotiations to the right track, Canada must put an immediate proposal to eliminate DST in exchange for getting rid of the customs tariff from the United States.”

Did Trump used the tariffs to pressure Canada before?

Yes. Before DSTA, Trump used definitions to pressure Canada on what he says role In the flow of the drug addiction, FentianImmigration is not documented in the United States, as well as broader commercial and economic issues.

On January 20, in his opening speech, Trump announced 25 percent tariffs On all Canadian goods and a 10 percent tariff on Canadian energy resources. Trump claimed that Canada has a “increasing imprint” in the production of fentanel, and he claimed that the Mexican carters run fentanel laboratories in Canada, especially in British Columbia, Alberta and Ontario.

These definitions were Stop temporarily for 30 days After the assurances from Canada that the appropriate action will be taken to curb the fentanel flow, then Rez it In early March.

Do other countries impose a similar digital tax?

Yes, many countries around the world have provided digital services taxes (DSTS) along the lines of Canada. France was one of the first to introduce Dest in 2019, when he concluded An angry response from Trump Who was spending his first term as president. The French tax is a 3 percent tax on revenue from online ads, digital platforms and user data sales.

The UK followed a 2 % tax on revenue from social media and search engines. Spain, Italy and Austria also carried out similar taxes, with prices ranging from 3 to 5 percent. Turkiye has one of the highest DST rates by 7.5 percent, and covers a wide range of digital services such as content flow and advertising.

Outside Europe, India has 2 percent of the “equation tax” on foreign e -commerce operators that earn revenues from Indian users. Kenya and Indonesia also created its digital tax systems, although it is slightly different – Indonesia, for example, VAT (VAT) – or sales tax – applies to foreign digital services, instead of DST.

The US government strongly opposed these taxes; Some of these conflicts have been stopped as part of the ongoing negotiations led by the Organization of Economic Cooperation and Development (OECD), an international organization consisting of 38 member states, working on a global agreement to impose taxes on digital companies fairly.

Canada was affected by the implementation of DST until 2024 to give time to OECD talks. But when progress stopped, proceed with a 3 percent tax that has been retroactively applied since January 2022.

Should the European Union be concerned about this?

The European Union is likely to monitor this position, as the digital tax is likely to be a major concern during its commercial talks with the United States.

Trump has repeatedly warned that similar tax measures from other allies, including the European Union countries, may face severe revenge.

The Trump administration previously objected to the digital taxes provided by the European Union member states such as France, Italy and Spain. In 2020, the American Trade Representative achieved these taxes under Article 301 and threatened the retaliatory definitions, although those taxes that were suspended while awaiting global tax negotiations led by the Organization of Economic Cooperation and Development.

The European Commission confirmed that digital taxes remain on the agenda, especially if a global deal under the Organization of Economic Cooperation and Development fails to achieve it. “All options are still on the table” in commercial discussions with the United States, including enforcement mechanisms against discriminatory US measures, President Ursula von der Layin said on June 26.

the High risks commercial negotiations Continuous between the United States and the European Union has a deadline on July 9-the date of the end of the Trump stop period for a period of 90 days on mutual global definitions. Trump threatened to impose A new tariff of up to 50 percent On major European exports, including cars and steel, if a deal is not reached.

In response to these threats, the European Union has prepared a list of reprisals of up to 95 billion euros (111.4 billion dollars), which would target a wide range of American exports, from agricultural products to Boeing aircraft. European Union leaders have indicated that they will defend the sovereignty of the bloc, while they remain open to negotiation.