Canada is sticking with a planned tax on big tech the U.S. opposes

Canada still plans to introduce a digital services tax in 2024 despite U.S. opposition, Finance Minister Chrystia Freeland said.

Freeland, speaking by phone from the Group of 20 finance ministers’ meeting in India, said Canada had already made a “significant concession” in 2020 by agreeing to delay its plan for the new tax. 

“Canada’s position is unchanged,” she told reporters. “It is really important for us to defend our national interests, and what we agreed to was a two-year pause.”

Her government has pledged to implement a new DST in early 2024, which would apply retroactively to Jan. 1, 2022 unless a global tax agreement is ratified by the Organization for Economic Cooperation and Development countries. The Canadian proposal would see a 3% tax on revenue earned by large technology companies in Canada.

Last week, the OECD unveiled an agreement to delay new DSTs for at least another year, a key request by President Joe Biden as his administration attempts to ratify the global tax pact. However, with Republican opposition to the OECD deal, it’s unclear whether Biden can get it through Congress.

U.S. Trade Representative Katherine Tai has asked Canada not to bring in its own DST, and business groups have expressed concern over potential trade repercussions if Canada ignores the American warnings.

Freeland said Canada would still prefer to see the OECD deal ratified, adding she has been discussing it with her Group of Seven counterparts and other ministers in attendance at the India summit.

“We did have some good conversations within the G-7 and bilaterally on finding a path forward where international agreement can be reached, and the Canadian interests can be protected and recognized,” she said.

A longer truce among OECD nations would avoid rekindling trade tensions sparked under Donald Trump’s administration. At the time, the U.S. threatened to retaliate with tariffs after some European countries introduced levies on companies including Alphabet Inc.’s Google and Meta Platforms Inc.’s Facebook.