By Staff Editor
OTTAWA, (Reuters) 鈥 Canada scrapped its digital services tax targeting U.S. technology firms late yesterday, just hours before it was due to take effect, in a bid to advance stalled trade negotiations with the United States.
Canadian Prime Minister Mark Carney and U.S. President Donald Trump will resume trade negotiations in order to agree on a deal by July 21, Canada鈥檚 finance ministry said in a statement.
Trump abruptly called off trade talks on Friday over the tax targeting U.S. technology firms, saying that it was a 鈥渂latant attack.鈥
He reiterated his comments on Sunday, pledging to set a new tariff rate on Canadian goods within the next week, which threatened to push U.S.-Canada relations back into chaos after a period of relative calm.
The breakdown in trade talks comes after the two leaders met at the G7 in mid-June and Carney said they had agreed to wrap up a new economic agreement within 30 days.
Canada鈥檚 planned digital tax was 3% of the digital services revenue a firm takes in from Canadian users above $20 million in a calendar year, and payments were to be retroactive to 2022.
It would have impacted U.S. technology firms, including Amazon AMZN.O, Meta META.O, Alphabet鈥檚 Google GOOGL.O and Apple AAPL.O, among others.
Monday collection will be halted, the Canada鈥檚 finance ministry statement said, and Finance Minister Fran莽ois-Philippe Champagne will bring forward legislation to rescind the Digital Services Tax 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
Stocks index futures rose after the news the digital tax will be rescinded and the bullish sentiment spilled over into Asian markets.
Canada is the second-largest U.S. trading partner after Mexico, and the largest buyer of U.S exports. It bought $349.4 billion of U.S. goods last year and exported $412.7 billion to the U.S., according to U.S. Census Bureau data.
The Biden administration had requested trade dispute settlement consultations over the tax in 2024, saying it was inconsistent with Canada鈥檚 North American trade deal obligations.
Canada had escaped Trump鈥檚 broad tariffs imposed in April but faces 50% duties on steel and aluminum.