Canada has rescinded its digital services tax in a bid to advance trade negotiations with the United States, days after US President Donald Trump called off talks in retaliation for the levy.
Canadian Prime Minister Mark Carney, in a statement on Sunday, said he and Trump have now agreed to resume trade negotiations.
鈥淭oday鈥檚 announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month鈥檚 G7 Leaders鈥 Summit in Kananaskis,鈥 Carney said.
The Canadian levy on technology firms had been set to go into effect on Monday.
Trump said on Friday that the tax, targeting 鈥渙ur American Technology Companies鈥, was 鈥渁 direct and blatant attack on our Country鈥.
The US is home to some of the world鈥檚 biggest technology companies, including Apple, Alphabet/Google, Amazon and Meta.
Canadian tech journalist Paris Marx told Al Jazeera that Carney鈥檚 decision to drop the levy shows Trump that 鈥淐anada can be pushed around鈥.
鈥淢ultinational tech companies do not pay their fair share of tax in Canada and the digital services tax is designed to address that,鈥 said Marx, who hosts the Tech Won鈥檛 Save Us podcast.
鈥淚t has been continually delayed for years in the hope 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鈥檚 been unable to move forward,鈥 he said.
鈥淢ore countries are enacting digital services taxes for that very reason, and Canada is wrong to back down,鈥 he added.
Canada鈥檚 planned digital tax was 3 percent of the digital services revenue a firm takes in from Canadian users above $20m in a calendar year, and payments were to be retroactive to 2022.
Digital services the levy was to apply to include online marketplaces, social media platforms, digital advertising and the sale or licensing of user data.
Canada鈥檚 finance ministry said the collection of the tax will be halted and that Finance Minister Fran莽ois-Philippe Champagne will bring forward legislation to rescind the Digital Services Tax (DST) Act.
鈥淭he DST was announced in 2020 to address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians,鈥 the statement said. 鈥淐anada鈥檚 preference has always been a multilateral agreement related to digital services taxation.鈥
Canada is the second-largest US trading partner after Mexico, and the largest buyer of U.S exports. It bought $349.4bn of US goods last year and exported $412.7bn to the US, according to US Census Bureau data.
Canada had escaped Trump鈥檚 broad tariffs imposed in April but faces 50 percent duties on steel and aluminum.