Following heightened tensions after the U.S. indicated it would halt trade discussions with Canada in response to the proposed tax targeting American technology firms, Ottawa has reversed its decision to implement a digital services tax, aiming to facilitate a broader trade agreement with the world’s largest economy.
The announcement marks a significant policy shift for the Canadian government, which had previously stood firm on pressing ahead with the tax despite Washington’s objections.
Officials now hope the change will revive negotiations and maintain momentum for a new economic and security pact, as outlined by Canadian officials at the recent G7 summit, with a target timeline of July 2025.
Originally, the digital services tax—which would have imposed a 3% levy on revenues from major tech companies operating in Canada, both domestic and international—was set to take effect retroactively from 2022, with the first payments due this week.
According to Canadian government statements, negotiations will proceed for as long as needed to secure an agreement, but not beyond what is necessary, reflecting a renewed commitment to deeper collaboration on both sides.
