(Washington) The Office of the United States Trade Representative says it will move to end Canada’s tax on large foreign digital services companies.
Last month, Parliament approved Justin Trudeau’s government’s plan to impose a 3% tax on foreign tech giants that generate revenue from Canadian users. Those companies will now have to pay taxes on that revenue in Canada.
Since many of them are based in the United States, the American industry is demanding action.
The Computer and Communications Industry Association, which represents several major technology companies including Amazon, Apple and Uber, has called on the Biden administration to take formal action on the U.S.-Mexico-Canada free trade agreement.
Ten other trade associations sent a letter to U.S. Trade Representative Katherine Tai demanding a strong response.
An official with the Office of the U.S. Trade Representative said he was open to using whatever tools he had at his disposal.
The digital tax was part of the Liberal election platform during the 2019 campaign. The Conservatives and the New Democrats have also proposed a similar tax.
The Trudeau government, however, delayed its implementation in order to devote more time to global efforts to establish a broader multinational tax plan.
A spokeswoman for Finance Minister Chrystia Freeland said Canada’s priority and preference has always been a multilateral agreement.
“The Canadian government has been clear for several years that it would move forward with its own digital services tax if a global agreement was not reached. We are committed to protecting Canada’s national economic interests,” Katherine Cuplinskas wrote in an email.
Other countries have introduced similar tools to tax the profits of large multinationals in the digital sector. Critics of the Canadian measure want Ottawa to put it on hold to give the Organisation for Economic Co-operation and Development (OECD) more time to put in place a global framework.
However, it has faced significant delays, particularly in the United States, where moves to sign the deal could remain blocked by the political context of a divided Congress.
The Liberals have maintained they have been clear with their American counterparts that Canada will implement the tax if the global framework does not change.
The U.S. Chamber of Commerce said in a press release last month that the Canadian tax contravenes this global framework and international tax principles.
“At this very sensitive time in Canada-U.S. trade relations, we call on the Government of Canada to reconsider this new unilateral and discriminatory levy, to refrain from designating its implementation and to re-join the multilateral process, in recognition of the importance of a common approach to the North American market.”